PRA has confirmed the adoption, in the form of a Supervisory Statement, of Financial Services Authority legacy material on supervisory expectations on firms that use IRB approaches to calculate credit risk. This Supervisory Statement supplements BIPRU4 and PRA Handbook guidance on:

  • Definition of Default;
  • Probability of Default;
  • Loss Given Default;
  • Exposure at Default;
  • Income-Producing Real Estate Portfolios;
  • Unrated Exposures; and
  • Notification and Approval of Changes to Approved Models.

PRA will soon consult on changes to this Supervisory Statement to prepare for CRR and the EBA technical standards on model validation. (Source: Credit Risk: Internal Ratings Based Approaches - SS 1/13)