1 Overview

1.1 This Prudential Regulation Authority (PRA) Policy Statement (PS) provides feedback to responses to Consultation Paper (CP) 1/19 'Credit risk mitigation: Eligibility of financial collateral'. It contains the updated Supervisory Statement (SS) 17/13 'Credit risk mitigation' (Appendix).

1.2 This PS is relevant to UK banks, building societies and PRA-designated UK investment firms that are subject to the Capital Requirements Regulation (575/2013) (CRR). It is not relevant to UK branches of firms in other European Economic Area (EEA) countries and non-EEA countries, or to insurance firms.

Background

1.3 In CP1/19 the PRA consulted on clarifications to expectations regarding the eligibility of financial collateral as funded credit protection under Part Three, Title II, Chapter 4 (Credit risk mitigation) of the CRR.

1.4 The PRA received three responses to the CP. Respondents generally welcomed the PRA's clarifications regarding the eligibility of financial collateral. However, respondents raised some specific concerns regarding the impact of the proposals on certain types of transactions. Some respondents also requested further clarification on certain aspects of the proposals. The PRA's feedback to these responses, and final policy decisions, are set out in Chapter 2.

Changes to draft policy