Prudential Regulation Authority Rulebook

4.1

For the purposes of Articles 124(2) and 126(2) of the CRR and in addition to the conditions set out therein, a firm may treat exposures as fully and completely secured by mortgages on commercial immovable property located in the UK in accordance with Article 126 of the CRR only where annual average losses stemming from lending secured by mortgages on commercial property located in the UK did not exceed 0.5% of risk-weighted exposure amounts over a representative period. A firm shall calculate the loss level referred to in this rule on the basis of the aggregate market data for commercial property lending published by the PRA in accordance with Article 101(3) of the CRR.

4.1A

For the purposes of Articles 124(2) and 126(2) of the CRR and in addition to the conditions set out therein, a firm may treat an exposure or any part of an exposure that is located in a jurisdiction that is not an EEA State as fully and completely secured for the purposes of Article 126 (1) of the CRR only if all of the following conditions are met:

1. (1) annual average losses stemming from lending secured by mortgages on commercial property located in that jurisdiction did not exceed 0.5% of the exposure value over a representative period where:
1. (a) there is sufficient evidence that the data used to determine the loss level referred to in this rule are of the same or better quality as the data required to be published under Article 101(3) of the CRR; and
2. (b) it is reasonable to rely on such data;
2. (2) the risk-weight that would be applied to that exposure or part of an exposure by the relevant supervisory authority in that jurisdiction is 50% or less.

4.2

For the purposes of 4.1 and 4.1A, a representative period shall be a time horizon of sufficient length and which includes a mix of good and bad years.

[Note: Arts. 124(2) and 126(2) of the CRR]