UK Prudential Regulator Publishes Capital Requirements Guidance for UK Firms in Light of COVID-19
03/31/2020The U.K. Prudential Regulation Authority has published two statements addressed to U.K. firms on the application of certain requirements of the EU Capital Requirements Regulation.
The first statement sets out the PRA's approach to calculating exposure under the internal models method for counterparty credit risk in light of the significant moves in counterparty credit risk exposures during the COVID-19 pandemic. Firms are reminded of their notification obligations in relation to any changes they make to their internal models method models as a result of the PRA's guidance. The second statement sets out the PRA's approach to VAR back-testing in light of the exceptional levels of market volatility seen since the COVID-19 outbreak took hold globally. The PRA will temporarily allow firms to offset increases in VAR back-testing exceptions through a reduction in risks-not-in-VAR capital requirements. The temporary forbearance will apply until September 2020, at which point the PRA will review the measure.
View the PRA's statement on exposure values for internal models method counterparty credit risk.
View the PRA's statement on VAR back-testing exceptions.
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