On 4 May 2020, the PRA issued a statement setting out its observations on the risk weighted treatment of exposures under the Bounce Back Loan scheme (BBLS), particularly eligibility for recognition as unfunded credit risk mitigation (CRM) under the Capital Requirements Regulation (CRR). The statement also sets out a change to the UK leverage ratio framework. The PRA is offering a modification by consent for banks subject to the UK Leverage Ratio Part of the PRA Rulebook to exclude loans under the BBLS from the leverage ratio total exposure measures, if they choose to do so.
The statement does not, however, provide an exhaustive description of the prudential requirements that apply to loans extended by participating banks to businesses under the BBLS, nor is it a comprehensive description of the regime under which CRM techniques impact the calculation of risk weighted exposure amounts. Firms are encouraged to review relevant articles of the CRR, and any relevant PRA rules and guidance (including expectations set out in PRA Supervisory Statement: 17/13 Credit risk mitigation). Where necessary, firms should seek independent advice to confirm that all the applicable requirements and expectations have been satisfied