1
Introduction
1.1
This supervisory statement (SS) is aimed at firms to which the Capital Requirements Regulation[1] applies.
Footnotes
- 1. Capital Requirements Regulation (575/2013) as it has effect in domestic law (CRR).
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1.2
Article 143(1) of the CRR requires the Prudential Regulation Authority (PRA) to grant permission to use the Internal Ratings Based (IRB) approach where it is satisfied that the requirements of Title II Chapter 3 of the CRR are met. The purpose of this supervisory statement is to provide explanation, where appropriate, of the PRA’s expectations when assessing whether firms meet those requirements, including in respect of the conservatism applied.
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1.3
Responsibility for ensuring that internal models are appropriately conservative and are CRR compliant rests with firms themselves. The PRA stated in The PRA’s approach to banking supervision that ‘if a firm is to use an internal model in calculating its regulatory capital requirements, the PRA will expect the model to be appropriately conservative’.
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1.4
[deleted]
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1.5
Footnotes
- 2. See Annex for the list of changes for the mortgage hybrid approach, the definition of default, PD estimation and LGD estimation.
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1.6
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1.7
The PRA expects that this document will be revised on a periodic basis.
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1.8
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