The Prudential Regulation Authority publishes Policy Statement updating its Supervisory Statement on Credit Risk Mitigation

Press Release
March 13, 2019

London, UK – March 13, 2019 - Today the Prudential Regulation Authority ('PRA') has published a Policy Statement and updated Supervisory Statement on credit risk mitigation ('CRM'), which will come into force on 13 September 2019.

It relates to the use of different types of guarantees as unfunded CRM for the purposes of calculating capital requirements under the EU Capital Requirements Regulation ('CRR').

Last year, the PRA published a consultation paper on this subject, setting out certain draft proposals which caused serious concern in the market.

Geoffrey Wynne, Head of the Trade & Export Finance Group and Sullivan’s London office, commented: "At a first reading this looks like good news for those who use guarantees as a credit risk mitigant as it clarifies a number of concerns particularly in respect of the use of credit insurance. It shows the power of industry-led reaction to concerns. As a warning it is still best to proceed with caution as the paper indicates, and we remain ready to assist through the jungle of words."

Key issues arising out of the consultation paper included:

The PRA received numerous responses to the consultation paper, and has made a number of significant changes to its proposals in direct response to that feedback, including:

The publications can be viewed on the Bank of England's site.

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