On 6 March 2019, the PRA published Policy Statement 7/19: Credit risk – definition of default (PS7/19).

In PS7/19 the PRA provides feedback to responses to Consultation Paper 17/18: Credit risk – definition of default (our blog is here). It also contains the PRA’s final policy, as follows:

  • an amendment to the Credit Risk Part of the PRA Rulebook to set thresholds for determining whether a credit obligation is material for the purpose of the Capital Requirements Regulation’s definition of default (Appendix 1); and
  • an update to the PRA’s expectations in Supervisory Statement 11/13: Internal Ratings Based (IRB) approaches (SS11/13) to implement the European Banking Authority’s regulatory products that relate to the definition of default (Appendix 2).

The PRA rule and updates to SS11/13 apply from 31 December 2020, unless a firm attains supervisory approval to extend this application date. The PRA has assessed that no additional amendments would need to be made to the changes outlined in PS7/19 in the event that the UK leaves the EU without a deal.