Clifford Chance

PRA consults on interpretation of eligibility criteria for unfunded credit risk mitigation

23 February 2018

The PRA has issued a consultation (CP6/18) on proposed changes to Supervisory Statement 17/13 on credit risk mitigation, in relation to the eligibility of guarantees as unfunded credit protection under the Capital Requirements Regulation (CRR).

Of particular note, the PRA sets out its view that a guarantor should be contractually obliged to pay out "within days" of the obligor's failure to pay, with some limited exceptions. This could potentially have a significant impact on the use of insurance as credit risk mitigation for capital purposes.

Download PDF