The PRA has published Consultation Paper 12/14: CRD IV: updates for credit risk mitigation, credit risk, governance and market risk (CP12/14).

In CP12/14, the PRA proposes the following:

  • credit risk mitigation (chapter 2). The PRA proposes to update the credit risk mitigation supervisory statement regarding expectations for firms applying for permission to use own estimates of volatility adjustments under the Financial Collateral Comprehensive Method;
  • credit risk (chapter 3). The PRA proposes to make two changes to the credit risk rules and supervisory statements adding: (i) an expectation that the PRA will not grant advanced internal ratings-based approach permissions in relation to exposures to central governments, public sector entities, central banks and financial sector entities; and (ii) a rule to introduce stricter criteria for the application of a 50% risk weight to certain commercial real estate exposures located in non-EEA countries;
  • governance (chapter 4). The PRA proposes additional guidance to clarify to firms that it interprets the limits on directorships held by directors of significant firms as also applying to the individuals who manage the consolidated group, and therefore the limits could apply to certain directors in an unregulated holding company; and
  • market risk (chapter 5). The PRA intends to update the market risk supervisory statement for firms on how to report risks not in value at risk requirements in FSA005.

The deadline for responding to:

  • chapters 2, 4, 5 and the non-EEA commercial property exposures in chapter 3 of CP12/14  is 8 August 2014; and
  • the remaining chapters of CP12/14 is 30 September 2014.

View CRD IV: updates for credit risk mitigation, credit risk, governance and market risk – CP 12/14, 30 June 2014