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Bank of England Publishes Consultation on Internal Ratings Based Approach
03/28/2017
The Prudential Regulation Authority has published a consultation paper outlining the Prudential Regulation Authority's proposed changes to the Internal Ratings Based approach. The proposed changes are to clarify the PRA's expectations for UK banks, building societies and PRA designated investment firms applying for IRB approval as outlined in its Supervisory Statement. First, with regard to how a firm can demonstrate that they meet the requirements of the Capital Requirements Regulation on the "prior experience" of using IRB approaches. Second, clarifying the use of external data to supplement internal data for estimating Probability of Default and Loss Given Default for residential mortgages. The PRA has also proposed two reference points for estimating Probability of Possession Given Default for residential mortgages for firms that lack significant possession data. Responses to the consultation are due by June 28, 2017. The PRA aims to publish an updated Supervisory Statement in October 2017.
Financial Regulatory Developments Focus