Prudential Regulation Authority Rulebook

1

A firm must assign to exposures in the form of covered bonds a relative excess exposure threshold CT_i of 15%, provided that the corresponding exposures in the form of covered bonds have been assigned to credit quality step 0 or 1 and must treat exposures in the form of covered bonds as single name exposures, regardless of other exposures to the same counterparty as the issuer of the covered bonds, which constitute a distinct single name exposure.

2

A firm must assign to exposures to a single immovable property a relative excess exposure threshold CT_i of 10% and a risk factor g_i for market risk concentrations of 12%.

3

A firm must assign to the following exposures a risk factor g_i for market risk concentrations of 0%:

1. (1) the UK central government and Bank of England denominated and funded in pounds sterling;
2. (2) multilateral development banks referred to in Article 117(2) of the CRR; and
3. (3) international organisations referred to in Article 118 of the CRR.

4

In respect of exposures that are fully, unconditionally and irrevocably guaranteed by one of the counterparties mentioned in 3D31.3(1) to (3), where the guarantee meets the requirements set out in 3G9, a firm must also assign a risk factor g_i for market risk concentrations of 0%.

5

For the purposes of 3D31.3(1), a firm must treat exposures that are fully, unconditionally and irrevocably guaranteed by bodies listed in 3D1, where the guarantee meets the requirements set out in 3G9, as exposures to the central government.

6.

In respect of exposures to central governments and central banks other than those referred to in 3D31.3(1), denominated and funded in the domestic currency of that central government and central bank, a firm must assign a risk factor g_i for market risk concentrations depending on their weighted average credit quality steps, in accordance with the following table:

7

In respect of exposures to the UK’s regional governments and local authorities not listed in 3D1, a firm must assign a risk factor g_i for market risk concentrations corresponding to weighted average credit quality step 2 in accordance with 3D31.6.

8

In respect of exposures that are fully, unconditionally and irrevocably guaranteed by the UK’s regional government or local authority that is not listed in 3D1, where the guarantee meets the requirements set out in 3G9, a firm must assign a risk factor g _i for market risk concentration corresponding to weighted average credit quality step 2 in accordance with 3D31.6.

9

A firm must assign to exposures in the form of bank deposits a risk factor g_i for market risk concentration of 0%, provided they meet all of the following requirements:

1. (1) the full value of the exposure is covered by a government guarantee scheme in the UK;
2. (2) the guarantee covers the firm without any restriction; and
3. (3) there is no double counting of such guarantee in the calculation of the SCR.