1.1This supervisory statement (SS) applies to PRA-authorised banks, building societies, PRA-designated investment firms, and PRA-approved or PRA-designated financial or mixed financial holding companies (collectively ‘firms’). This statement:

• clarifies the Prudential Regulation Authority’s (PRA) expectations as to the inclusion of securities financing transactions (SFTs) in the calculation of the credit valuation adjustment capital requirement;

• clarifies the identification of qualifying central counterparties;

• sets out the factors which the PRA expects such firms to take into account when applying for certain permissions related to the counterparty credit risk regulatory framework; and

•sets out the PRA’s approach to model changes for Internal Model Method (IMM) models and Value-at-Risk (VaR) models used for SFTs (‘SFT VaR Method’ models).

1.2This statement should be considered in addition to the requirements in Article 162 of the Credit Risk: Internal Ratings Based Approach (CRR) Part of the PRA Rulebook; the Credit Valuation Adjustment Risk, Counterparty Credit Risk (CRR) and Credit Risk Mitigation (CRR) Parts of the PRA Rulebook; Section 6 of Chapter 6 of Title II of Part Three of the CRR; and the high level expectations outlined in ‘The PRA’s approach to banking supervision’.