1.1 This Consultation Paper (CP) sets out the Prudential Regulation Authority's (PRA) proposed approach to implementing new requirements relating to the specification of the nature, severity, and duration of an economic downturn in the internal ratings based (IRB) approach to credit risk.

1.2 The proposals in this CP would result in new UK Technical Standards (Appendix 1) and amended expectations in Supervisory Statement (SS) 11/13 'Internal Ratings Based (IRB) approaches' (Appendix 2).

1.3 The PRA is also proposing to make additional minor changes to SS11/13 to reflect the UK's exit from the EU, which are summarised in Chapter 3 of this CP and set out in Appendix 2.

1.4 The proposals are relevant to UK banks, building societies, and PRA-designated UK investment firms.

Background

1.5 In 2016, the European Banking Authority (EBA) published a set of regulatory products (the IRB roadmap) with the aim of reducing unwarranted variability in risk-weighted assets (RWAs) calculated using banks' IRB models.