On 22 May 2020, the PRA issued a statement providing further information on the application of regulatory capital and IFRS 9 requirements to payment holidays granted or extended to address the challenges of the COVID-19 pandemic.

In summary, the PRA’s view is that eligibility for, and use of, COVID-19 related payment deferrals or extensions to those deferrals granted in accordance with the FCA’s proposed guidance would not automatically result in a loan: (i) being regarded as having suffered a significant increase in credit risk or being credit-impaired for expected credit loss accounting purposes; or (ii) triggering a default under the Capital Requirements Regulation. The PRA’s statement goes on to explain what this means in practice. The rest of the PRA statement covers two issues: (i) regulatory definition of default; and (ii) identifying whether a significant increase in credit risk or credit impairment has occurred for IFRS 9.