Policy for identifying exposures

6.1 The PRA expects a firm that is seeking to apply the Standardised Approach on a permanent basis to certain exposures to have a well-documented policy, explaining the basis on which exposures would be selected for permanent exemption from the IRB approach. This policy should be provided to the PRA when the firm applies for permission to use the IRB approach and maintained thereafter. Where a firm also wishes to undertake sequential implementation, the PRA expects the firm’s roll-out plan to provide for the continuing application of that policy on a consistent basis over time.

(CRR Article 143(1), 148(1) and CRR Article 150(1))

Exposures to sovereigns and institutions

6.2 The PRA may permit the exemption of exposures to sovereigns and institutions under CRR Articles 150(1)(a) and 150(1)(b) respectively, only if the number of material counterparties is limited and it would be unduly burdensome to implement a rating system for such counterparties.