Identification of obligors

11.A1 When applying the definition of default in CRR Article 178, the PRA expects firms to comply with the EBA’s Guidelines on the application of the definition of default (EBA/GL/2016/07).

11.1 The PRA expects that if a firm ordinarily assigns exposures in the corporate, institution or central government and central bank exposure classes to a member of a group substantially on the basis of membership of that group and a common group rating, and the firm does so in the case of a particular obligor group, the firm should consider whether members of that group should be treated as a single obligor for the purpose of the definition of default set out in CRR Article 178(1).

11.2 The PRA would not expect a firm to treat an obligor as part of a single obligor under the preceding paragraph if the firm rated its exposures on a stand alone basis or if its rating was notched. (For these purposes a rating is notched if it takes into account individual risk factors, or otherwise reflects risk factors that are not applied on a common group basis.) Accordingly, if a group has two members which are separately rated, the PRA would not expect that the default of one would necessarily imply the default of the other.

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