1.1 This Prudential Regulation Authority (PRA) Policy Statement (PS) provides feedback to responses to Consultation Paper (CP) 14/20 'Internal Ratings Based UK mortgage risk weights: Managing deficiencies in model risk capture'. It also contains the PRA's final policy, as follows:

• an updated Supervisory Statement (SS) 11/13 'Internal Ratings Based (IRB) approaches'.

1.2 This PS is relevant to PRA-authorised UK banks, building societies, and ring-fenced banks (RFBs) holding Internal Ratings Based (IRB) model permissions. It may be of interest to other firms, including those considering applying for IRB model permission, and other market participants.

Background

1.3 In CP14/20, the PRA proposed to introduce two minimum expectations on mortgage risk weights that applied at all levels of consolidation and to all UK residential mortgage exposures, including buy-to-let:

• a risk weight of at least 7% for each individual UK residential mortgage exposure; and

• an exposure-weighted average risk weight of at least 10% for all UK residential mortgage exposures to which a firm applies the IRB approach.

Summary of responses

1.4 The PRA received ten responses to the CP. Respondents made a number of observations, which are set out in Chapter 2.