1 Overview

1.1 This Prudential Regulation Authority (PRA) Policy Statement (PS) provides feedback to responses to Consultation Paper (CP) 6/18 ‘Credit risk mitigation: Eligibility of guarantees as unfunded credit protection’. It also contains the PRA’s final policy in updated:

• Supervisory Statement (SS) 17/13 ‘Credit risk mitigation’ (Appendix 1); and

• SS31/15 ‘The Internal Capital Adequacy Assessment Process (ICAAP) and the Supervisory Review and Evaluation Process (SREP)’ (Appendix 2).

1.2 This PS is relevant to all firms bound by the Capital Requirements Regulation (575/2013) (CRR).

Background

1.3 In CP6/18 the PRA proposed changes to SS17/13 to clarify expectations regarding the eligibility of guarantees as unfunded credit protection under CRR Part Three, Title II, Chapter 4 (Credit risk mitigation).

1.4 The PRA received 31 responses to the CP. Respondents generally welcomed the PRA’s clarification of its expectations regarding the eligibility of guarantees as credit risk mitigation (CRM). However, several respondents raised concerns regarding the impact of the proposals on certain types of guarantees. Several respondents also requested further clarification on certain aspects of the proposals.

Changes to draft policy