11.1 In accordance with Article 191A(1)(f) of the Credit Risk Mitigation (CRR) Part, if a firm chooses to recognise the effect of funded credit protection securing unfunded credit protection obligations, any references to the ‘borrower’ or ‘obligor’ within each collateral eligibility requirement are deemed to have a specific meaning that reflects the purpose of that eligibility requirement. In particular, the PRA expects that:

(a) in cases where the collateral eligibility requirements in the Credit Risk Mitigation (CRR) Part refer to the borrower or obligor in their role as the entity providing the collateral, these references should be read to refer to the unfunded credit protection provider (for example Article 212(1)(a) of the Credit Risk Mitigation (CRR) Part);

(b) in cases where the collateral eligibility requirements in the Credit Risk Mitigation (CRR) Part refer to the default of the borrower or obligor as a trigger for the firm to take control of and then liquidate the collateral, these references should be read to refer to the event of default of both the obligor and the protection provider (for example the first sentence of Article 194(4) of the Credit Risk Mitigation (CRR) Part); and