Level of application of the definition of default for retail exposures

7.1 As set out in Article 178(1) of the Credit Risk: Internal Ratings Based Approach (CRR) Part, firms may apply the definition of default for retail exposures at individual credit facility level. Where a firm is using the SA, the criteria for treating exposures as retail that are set out in the definition of defaulted exposure in Rule 1.2 of the Credit Risk: Standardised Approach (CRR) Part of the PRA Rulebook apply.

7.2 The PRA expects that firms should choose the level of application of the definition of default between obligor and facility for all retail exposures in a way that reflects their internal risk management practices.

7.3 Firms may apply the definition of default at the level of an obligor for some types of retail exposures and at the level of a credit facility for others, where this is well justified by internal risk management practices (eg as result of a different business model of a subsidiary). The PRA expects that firms should only apply different approaches where there is evidence that the number of situations where the same obligors are subject to different definitions of default at different levels of application is kept to a strict minimum.