United Kingdom: PRA consults on Probability of Default and Loss Given Default Estimation
The Prudential Regulation Authority (PRA) has published a Consultation Paper (CP 21/19) on Probability of Default (PD) estimation and Loss Given Default (LGD) estimation.
The PRA is seeking feedback on proposals set out in the consultation paper, including the expected impact of the proposals on capital requirements.
The PRA, through CP 21/19, proposes implementation approach for the European Banking Authority’s (EBA’s) recent regulatory products relating to PD estimation, LGD estimation and the treatment of defaulted exposures in the Internal Ratings Based approach to credit risk.
The PRA also proposes to update its expectations in Supervisory Statement (SS) 11/13 ‘Internal Ratings Based (IRB) approaches’ to implement the EBA’s regulatory products that relate to PD and LGD estimation and the treatment of defaulted exposures.
Stakeholders are required to submit comments by December 18, 2019.