CP6/23 - The non-performing exposures capital deduction

Regulatory updates
Written By Manish Patidar

On 14 March 2023, the Prudential Regulation Authority (PRA) published Consultation Paper (CP) 6/23 (CP6/23) proposing the removal of the CET1 deduction requirement for non-performing exposures (NPEs) that are treated as insufficiently covered by firms’ accounting provisions.

The proposed changes would be implemented via amendments to the following Parts of the PRA Rulebook:

  • The Own Funds and Eligible Liabilities (CRR); and

  • Reporting (CRR).

This consultation closes on 14 June 2023, and the final policy is expected by Q4 2023.

Proposed Reporting Changes:

The PRA proposes to remove the following reporting requirements:

  • Template ‘C 35.01 - NPE loss coverage: the calculation of deductions for non-performing exposures (NPE LC1)’;

  • Template ‘C 35.02 - NPE loss coverage: minimum coverage requirements and exposure values of non-performing exposures excluding forborne exposures that fall under Article 47c (6) CRR (NPE LC2)’;

  • Template ‘C 35.03 – NPE loss coverage: minimum coverage requirements and exposure values of non-performing forborne exposures that fall under Article 47c (6) CRR (NPE LC3)’; and

  • Row 0513 ‘(-) Insufficient coverage for non-performing exposures’ from template ‘C 01.00 – Own funds (CA1)’, and from Capital+ templates (PRA101 and PRA102).

Manish Patidar
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