• Report
  • PRA
  • Harmonizing default definition
  • Prudential Regulatory Authority
  • Global Research & Analytics
  • European Banking Authority
March 20, 2019

Harmonizing default definition

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.