The Prudential Regulation Authority’s (PRA) Supervisory Statement SS12/13, which sets out expectations in relation to counterparty credit risk (CCR), underwent only minor revisions between its previous near-final draft in December 2023 and 2024 near-final versions. While the overall structure and regulatory posture remain largely unchanged, several notable amendments are evident, particularly in the areas of legal references, language signalling regulatory certainty, and editorial refinements. This section outlines those differences, limiting attention to what has substantively or formally changed between the two documents.
Internal CVA Models and the Maturity Factor ‘M’
A key technical amendment in the 2024 version is the updating of article references to align with Basel 3.1 changes to the Capital Requirements Regulation (CRR). References such as CRR Article 162(2)(h) and 162(2)(g), which were used in the 2023 edition, have been updated in the 2024 version to CRR Articles 162(2A)(h) and 162(2A)(g) respectively. These changes do not affect the substance of the guidance but reflect the legislative transition associated with the Basel 3.1 implementation.
Another subtle but meaningful difference is the shift in regulatory language. In the 2023 edition, the PRA stated its expectations were based on permissions “as proposed under” the relevant CRR provisions, signalling that the framework was still in a near-final state. In 2024, this language is replaced with “in accordance with” the CRR, indicating that these provisions have now entered into force. While the core expectation that firms demonstrate robust internal CVA models before using them to determine the maturity factor M remains intact, this wording change marks the transition from proposal to established rule.
The removal of highlight formatting in 2024, which was previously used to signal near-final sections in 2023, further reinforces the point that these expectations have now been formally adopted. Apart from the legislative references and stylistic changes, the remainder of the section, including the supervisory tone, application process, and deletion of the former guidance on setting M=1, remains substantively unchanged between the two versions.
Inclusion of Securities Financing Transactions in CVA Requirements
The most substantive deletion occurs in Section 3, where paragraph 3.2 of the 2023 edition is removed in the 2024 update. This paragraph had provided a concise definition of securities financing transactions (SFTs) for the purposes of CVA capital calculations, including examples such as repurchase agreements and securities lending. In the 2024 document, this paragraph is replaced by a simple placeholder stating “[This paragraph has been deleted]”.
This removal implies a regulatory decision to defer to existing definitions elsewhere in the CRR or the PRA Rulebook, and signals a move away from duplicative or explanatory text in favour of cross-referencing formal sources. No other content in Section 3 was amended, and the thresholds, conditions, and supervisory expectations for including SFTs in CVA capital charges remain unchanged.
Qualifying Central Counterparties (QCCPs)
Section 4 remains effectively identical across both versions, with only editorial-level differences (e.g., punctuation) that do not alter the meaning. An existing paragraph marked as deleted (§4.3) continues to be flagged as such in both 2023 and 2024, with no reinstatement or modification. The only material implication is that the section has undergone no further development in the intervening period.
Monitoring of IMM Model Limitations
Introduced in late 2023, Section 4A sets expectations for firms using the Internal Model Method (IMM) to formally identify and manage model limitations. The 2024 edition replicates this section verbatim, with one exception: the highlighting used in the 2023 document to indicate near-final guidance has been removed in 2024, signalling its finalisation.
Additionally, a footnote number attached to the EEPE floor formula in paragraph 4A.5 has changed from footnote 1 to footnote 2, though the content of the footnote remains the same. This minor technical change does not impact the guidance but reflects standard editorial maintenance.
Treatment of Unsettled Margin
No substantive changes were introduced between the 2023 and 2024 versions of Section 4B, which was newly added in the December 2023 update. The guidance clarifying how unsettled margin should be treated in Effective Expected Positive Exposure (EEPE) calculations under the Internal Model Method (IMM) remains entirely unchanged in the 2024 edition. The section continues to reflect the PRA’s cautious supervisory stance, with no shift in tone, content, or emphasis. Accordingly, this section does not contribute new regulatory expectations or interpretative developments in 2024.
Annual SMF Attestation for IMM Models
Section 5, covering the annual Senior Management Function (SMF) attestation for IMM models, is also unchanged between the two versions. While the 2023 edition had been marked as near-final, the 2024 text adopts the section wholesale without edits to either the content or tone. The requirement for an SMF holder to attest annually to the PRA on model compliance under CRR Part Three, Title II, or to provide a credible remediation plan if non-compliance is identified, remains the same. Similarly, the cap on the number of SMF holders responsible for such attestations (normally no more than two) is reiterated verbatim. Thus, while the formatting watermark from 2023 has been removed, no substantive regulatory changes occurred.
Annual SMF Attestation for Standardised CVA (SA-CVA)
This section was introduced in December 2023 as new guidance and was finalised in 2024 with only cosmetic updates. The 2024 version removes the “[new text]” notation from 2023 and introduces minor formatting refinements, such as improved structuring of attestation points, but does not alter the meaning or requirements. The SMF attestation for SA-CVA models mirrors the IMM structure, requiring confirmation of full compliance or the presence of a remediation plan where appropriate. The language remains materially identical, confirming the PRA’s intent to extend senior management accountability uniformly across both internal and standardised capital models under the new CVA framework introduced via Basel 3.1.
Annual SMF Attestation for SFT VaR Models
Like Section 5A, Section 5B was introduced in the 2023 update as a near-final draft and is formally adopted in 2024. The only substantive enhancement in the 2024 version is the explicit citation of CRR Article 221(12)(b) as the regulatory basis for requiring a remediation plan in cases of material non-compliance. This legal anchoring was absent in 2023, though the underlying expectation was present.
IMM Model Change Process (Excluding Repo VaR)
The most visible structural change in the 2024 edition of SS12/13 is found in Section 6. In the 2023 version, this section covered both IMM models and the Internal Model Method for Securities Financing Transactions (commonly referred to as Repo VaR). However, in 2024, all references to Repo VaR are removed from Section 6, which now deals exclusively with IMM. This reorganisation aligns with the creation of a dedicated Section 7 for Repo VaR model change governance.
Key differences include the removal of combined terminology such as “IMM or Repo VaR models,” which in 2023 had appeared in multiple paragraphs (e.g., §6.1, §6.4, §6.7). The updated 2024 text restricts this to simply “IMM models,” thereby improving scope clarity and reducing ambiguity over applicability. Despite this restructuring, the underlying expectations for IMM model changes, including requirements for materiality assessments, thresholds for significant changes (e.g., >5% change in capital or exposure), and post-approval change governance, remain unchanged in substance.
The PRA’s tone continues to prioritise proportionality and predictability, with an expectation of only a limited number of significant pre-notified model changes per firm each year. The 2024 edition also retains the same examples of significant versus non-significant model changes (e.g., new product types or major system re-engineering versus calibration refinements or minor portfolio adjustments). Overall, Section 6 in 2024 serves as a consolidation of the IMM change process, separating it more cleanly from Repo VaR, while reinforcing existing supervisory standards rather than introducing new ones.
SFT VaR Method: Process for Model Changes
The 2024 edition of SS12/13 finalises the guidance introduced in December 2023 regarding the SFT VaR method (previously referred to as Repo VaR). The most important structural change in 2023 had been the creation of a dedicated section for SFT VaR model governance, separating it from IMM. In 2024, this structure is retained without further amendment, and the PRA confirms the content as finalised.
No substantive textual changes were made between versions. The requirements for model change governance, including distinctions between prior approval, pre-notification, and post-notification depending on a firm’s SFT VaR permission status under CRR Article 221, remain identical. Similarly, the thresholds for materiality, documentation expectations, back-testing requirements, and fee-charging provisions are all carried over from 2023 without amendment. The only change across versions is the removal of highlight formatting, signalling the final adoption of this section.
The consistency between versions demonstrates the PRA’s intent to subject the SFT VaR model change process to the same degree of rigour as IMM models, aligning closely with Basel 3.1 expectations and clarifying internal model governance obligations.
Standardised Approach to CVA (SA-CVA): General Expectations
Section 8, introduced in the 2023 update to reflect the implementation of SA-CVA under Basel 3.1, also remains unchanged in the 2024 final statement. The PRA reiterates its expectations around:
- firms’ documented processes for addressing missing CVA input data;
- model risk from margin agreements;
- setting conservative margin periods of risk (MPOR);
- CVA desk independence;
- the use of advanced computational techniques such as adjoint algorithmic differentiation (AAD); and
- treatment of onshore vs offshore FX pairs (e.g., CNH vs CNY).
There are no edits to the text or tone in 2024, which confirms that the PRA considers these standards clear and non-controversial. These expectations reflect a shift from purely formula-based CVA calculations to a more risk-sensitive, governance-intensive framework, and the unchanged content from 2023 to 2024 reflects continuity in supervisory interpretation.
CVA Transitional Provisions
The only substantive difference between the 2023 and 2024 versions of Section 9 lies in the updated dates for transitional arrangements following the UK’s decision to delay Basel 3.1 implementation by six months.
In the 2023 edition, the cut-off date for transitional relief – after which new trades could no longer be grandfathered under the legacy CVA regime – was 1 July 2025. In 2024, this date is updated to 1 January 2026 in all relevant locations (Sections 9A and 9B) although this will likely need to change again to 1 January 2027. This change affects:
- the date after which newly executed or materially amended trades lose grandfathering;
- the baseline calculation date for the legacy exempt ratio; and
- examples of amendment types that could trigger a loss of transitional status.
Aside from this date adjustment, the guidance, criteria, and tone are identical across versions. The PRA continues to emphasize that firms must not exploit transitional relief and must monitor for material changes in their legacy portfolios that could warrant recalculation of the exempt ratio or reclassification of amended trades.
Conclusion
Conclusion
The 2024 revision of PRA Supervisory Statement SS12/13 builds on the draft enhancements introduced in late 2023, refining the PRA’s expectations around counterparty credit risk without altering their core supervisory stance. Most of the changes reflect a transition from provisional to final guidance, with previously highlighted or near-final text now presented as settled policy. This includes updates to regulatory language that clarify the status of internal model permissions and formalise expectations that were previously proposed under the evolving Basel 3.1 regime.
Across the statement, the PRA demonstrates a clear preference for consolidation and clarity. Redundant or explanatory text has been removed where definitions are already established in the Rulebook, and editorial improvements such as updated article references and consistent formatting, support a more streamlined and precise regulatory document. Finalisation of new content introduced in the prior year, particularly around model attestation and change governance, signals the PRA’s intent to hold firms to consistent standards across internal and standardised approaches.
A key structural refinement involves separating governance expectations for repo-style Value-at-Risk models from broader internal model guidance, reflecting the growing complexity and independence of these risk measurement frameworks.