This post presents a detailed comparison of the Prudential Regulation Authority’s (PRA) Supervisory Statement SS10/13 on the Standardised Approach to Credit Risk, focusing exclusively on the differences between the version published in May 2020 and the near-final updated version released in September 2024. The 2024 version of SS10/13 reflects the PRA’s implementation of Basel 3.1 reforms, scheduled to come into effect on 1 January 2027. Rather than reiterating unchanged guidance, I’m going to focus on substantive changes in scope, structure, terminology, and supervisory expectations introduced in the updated statement.
This analysis is organised by corresponding section numbers across both versions. Where entire sections have been deleted, newly inserted, or significantly revised, these changes are examined in detail. The goal is to assist in understanding how the PRA’s supervisory expectations for firms using the standardised approach to credit risk have evolved and to highlight areas where new operational, governance, or data requirements may arise as a result of the near-final Basel 3.1 update.
Exposures to Institutions
The 2024 update to SS10/13 introduces only minimal changes to the PRA’s expectations regarding exposures to institutions under the standardised approach. While the substantive guidance remains unchanged from the 2020 version, the updated statement reflects targeted editorial adjustments to align with post-EU regulatory language and simplify terminology.
In both the 2020 and 2024 statements, the PRA confirms that no additional financial institutions, beyond those directly subject to the UK Capital Requirements Regulation (UK CRR), qualify for the preferential risk weight treatment under Article 119(5) of the CRR. This article allows for the application of a lower risk weight to exposures to certain institutions where supervisory equivalence has been established. The PRA continues to take the position that no third-country institutions currently meet the equivalence standard required to benefit from this treatment.
The 2024 statement, however, removes the term “concessionary” when referring to this preferential treatment, and avoids reference to EU-specific legislative mechanisms. This reflects a broader trend throughout the updated supervisory statement: replacing EU-centric terminology with UK-specific language, consistent with the UK’s post-Brexit regulatory autonomy. Despite these changes in language, the underlying supervisory expectation, that firms should not apply the lower risk weight to exposures beyond those listed in the UK CRR, remains the same.
Third Country Equivalence
One of the most notable structural changes in the 2024 update is the complete removal of the section on third country equivalence, which had been present as Section 3 in the 2020 version. The 2020 statement outlined how firms should treat exposures to institutions, central governments, and other counterparties located in jurisdictions outside the European Economic Area (EEA), referencing specific CRR articles that allow preferential risk weight treatment where an equivalence determination has been made.
In 2020, the PRA acknowledged the EU Commission’s role in making such determinations and outlined its own approach in the absence of an EU decision. The removal of this section in 2024 reflects the UK’s post-Brexit regulatory independence. Decisions on equivalence are now made solely within the UK framework, and the PRA no longer considers it necessary to provide separate commentary in SS10/13. Firms are expected to refer directly to the relevant UK legislation or PRA Rulebook for guidance on third-country equivalence matters.
Exposures to Unrated Corporates (Added)
The 2024 version introduces a new Section 3A, setting out the PRA’s expectations for firms seeking permission to apply preferential risk weights to exposures to unrated corporates. This section implements the Basel 3.1 flexibility embedded in CRR Article 122(6) and represents a significant addition to the standardised approach framework.
Firms may now, subject to PRA approval, treat certain unrated corporates as investment grade for risk-weighting purposes, even without an external credit assessment. To obtain this permission, a firm must demonstrate that it has robust, comprehensive internal credit risk management processes that enable it to distinguish between investment grade and non-investment grade obligors reliably. The PRA may also require independent attestation, either from Internal Audit or a third party, that these systems are effective.
Importantly, the PRA defines “investment grade” as a level of credit risk equivalent to a rating that would map to Credit Quality Steps 1, 2, or 3 under the standardised approach. This ensures the alternative treatment is only applied to corporates of genuinely high credit quality. The addition of this section represents a key development in the supervisory framework, potentially allowing well-governed firms greater flexibility in capital treatment of certain exposures.
Retail Exposures
The 2024 update introduces two main changes in this area: (i) a shift in the currency denomination of the retail exposure threshold, and (ii) the introduction of new guidance on “transactor” exposures.
Firstly, the retail threshold has been converted from a euro-denominated figure to its sterling equivalent. The 2020 version referred to the standard €1 million threshold; the 2024 update replaces this with £880,000. This change reflects both the UK’s exit from the EU and recalibrates the limit using a consistent GBP value.
Secondly, the 2024 SS introduces guidance on classifying transactor exposures. These typically relate to credit card accounts where the borrower repays the full balance regularly. New paragraphs 4.2–4.3 clarify that technical issues (such as payment processing errors) should not disqualify an obligor from being classified as a transactor. The PRA outlines specific examples of what constitutes a “technical event” and confirms that these should not be treated as evidence of failure to repay. This guidance was not present in the 2020 SS and aligns with the Basel 3.1 framework’s more nuanced view of retail credit risk.
Real Estate Exposures
This section has undergone substantial revision. The 2020 version was narrowly focused on residential mortgages and titled accordingly. The 2024 update broadens its scope under the heading “Real estate exposures,” incorporating both residential and commercial property exposures, including those with mixed-use collateral.
Notably, the 2024 version removes several subsections:
- Buy-to-let guidance (paras 5.3–5.5) and the accompanying historical loss data are deleted.
- Retirement Interest-Only (RIO) mortgages (paras 5.6–5.8) are no longer covered in SS10/13, with the guidance now located in SS3/24 (Definition of Default).
New guidance is introduced in its place:
- Definition of “residential real estate” (paras 5.9–5.10): Firms must establish clear policies for classifying properties and are cautioned against including certain types (e.g. care homes, holiday lets, student accommodation) unless they meet strict transferability criteria.
- Mixed-use collateral (paras 5.11–5.12): For exposures secured by both residential and commercial property, firms must split the loan and apply the appropriate risk weights to each component.
- Illustrative examples (para 5.13): The PRA provides case studies demonstrating how to apply risk weights under various real estate scenarios, including undrawn commitments and junior liens.
These changes reflect the greater complexity of real estate exposures under Basel 3.1 and the PRA’s intention to support consistent implementation across firms.
Exposures in Default
The 2020 version contained a short section clarifying that mortgage indemnity products could be recognised as eligible guarantees for defaulted exposures. This guidance is removed entirely in 2024, likely reflecting either redundancy due to a dedicated Supervisory Statement (SS3/24 Credit Risk Definition of Default) under Basel 3.1.
Items Associated with Particularly High Risk
The previous guidance under Section 7, dealing with high-risk items attracting a 150% risk weight under CRR Article 128(3), is also deleted. The 2020 SS had identified criteria such as fund opacity and venture capital characteristics to guide firms. These references are absent from the 2024 version, signalling that firms should rely solely on the CRR and supporting technical standards for classification.
Mapping of ECAI Credit Assessments
Section 8 in the 2020 SS provided transitional guidance for firms on how to map external ratings to credit quality steps in the absence of an EU ITS. This section is omitted in 2024, as the UK has since adopted its own formal mapping framework. The need for interim supervisory commentary is no longer present.
Currency Mismatch Multiplier (Added)
The 2024 version introduces Section 9 to guide firms on the newly introduced currency mismatch multiplier, applied to certain exposures (notably retail and residential mortgages) where the loan currency differs from the borrower’s income.
The PRA outlines when firms must reassess for mismatch risk and provides thresholds and triggers for doing so. It also introduces a 90% threshold for natural and financial hedges to determine if the multiplier should apply. This new section reflects Basel 3.1 changes and highlights an increased emphasis on FX risk in standardised credit exposures.
Commitments (Added)
Section 10 clarifies how firms should calculate exposure values for off-balance sheet items, particularly commitments. The key new expectation is that firms need not include any unadvised internal credit limit in the exposure value calculation. This ensures capital is held against actual, contractually available credit rather than theoretical or administrative headroom. This clarification was absent from the 2020 version.
External Credit Ratings (Added)
This new section sets out limitations on the use of external ratings that incorporate government support. Firms are explicitly prohibited from using uplifted ratings based on implicit sovereign guarantees when determining risk weights.
However, ratings where government support is assessed but deemed to have no effect on the final credit grade may still be used, provided the firm verifies and monitors that status. These expectations did not appear in the 2020 SS and reflect post-crisis regulatory caution around inflated ratings.
Equity Exposures (Added)
The final new section introduced in 2024 addresses equity exposures. Specifically, it clarifies how to determine whether an equity qualifies as “higher risk” based on the age of the underlying undertaking. The PRA provides detail on how to assess a company’s age, including how to treat dormant periods or pre-trading activity. This section implements Basel 3.1 requirements and reflects the introduction of differentiated risk weights for equity exposures, which were not addressed in the 2020 statement.
Conclusion
The 2024 revision of SS10/13 marks a significant recalibration of the PRA’s supervisory expectations in light of the Basel 3.1 framework and the UK’s evolving regulatory environment post-Brexit. While several sections have undergone purely editorial updates for clarity and alignment with domestic regulation, many others reflect material changes to risk-weighting treatment, risk governance standards, and operational expectations for firms.
Notable developments include the introduction of permission-based approaches for unrated corporates, granular treatment of real estate exposures, and new risk considerations such as the currency mismatch multiplier and equity exposure criteria. Equally important are the areas where guidance has been withdrawn, particularly in relation to third-country equivalence, defaulted exposures, and high-risk items.