On March 6, 2019, the Prudential Regulation Authority (PRA) published its Policy Statement (PS) 7/19 on ‘Credit risk: definition of default’. Crisil GR&A provides an analysis on the ‘new default definition’. The PRA has also published its revised supervisory statement on internal ratings-based approach, which has to be applied from December 31, 2020, unless a firm attains supervisory approval to extend this application date.

In the report, we compare the PRA’s recent policy statement on definition of default with EBA guidelines. Our analysis shows followings:

• Convergence in the EBA and the PRA regulations for ‘days past due’ criterion
• The PRA’s UTP indicators remains same as the EBA’s.
• The PRA expects firms to use lower materiality thresholds for retail exposures and non-retail exposures compared with the EBA.