On 16 February 2018, the Prudential Regulation Authority (“PRA”) published a consultation paper containing a draft Supervisory Statement to clarify the PRA’s expectations regarding the eligibility of guarantees as unfunded credit protection under the Capital Requirements Regulation (575/2013) (“CRR”).

The proposals are the first meaningful guidance published by the PRA on its interpretation of the CRR eligibility criteria for guarantees. Unfortunately, they also raise some serious concerns for banks.

Originally Published in Trade Finance Magazine.