1.1 The purpose of this supervisory statement (SS) is to provide clarification to firms of the Prudential Regulation Authority’s (PRA) expectations in respect of the application of the definition of default. This 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’).

1.2 The definition of ‘defaulted exposure’ that is set out in Rule 1.2 of the Credit Risk: Standardised Approach (CRR) Part of the PRA Rulebook refers to Article 178 of the Credit Risk: Internal Ratings Based Approach (CRR) Part of the PRA Rulebook. References to that article in this SS are therefore relevant to firms applying the SA unless otherwise stated.

Definitions

1.3 Unless otherwise specified, terms used in this SS have the same meaning as in either the relevant Part of the PRA Rulebook or the CRR.