The UK Prudential Regulation Authority (PRA) has published a policy statement confirming amendments to the large exposures framework in respect of exposures arising from mortgage lending, exposures to the UK FSCS, requirements for G-SIIs and O-SIIs to highly indebted French non-financial corporations. These formed part of the 2024 consultation on the large exposures framework, which also included other topics not covered by this policy statement. The policy statement also confirms amendments in respect of groups of connected clients, as consulted on in 2023.
The PRA had proposed removing the provision allowing firms to reduce exposures by using immovable property on the grounds that immovable property is illiquid and therefore not a reliable mitigant in a stress scenario. The policy statement confirms that this change will proceed. However, in respect of small domestic deposit takers (SDDTs), the PRA has acknowledged feedback that such a change may require revisiting the PRA's strong and simple framework proposal that the PRA would engage with SDDTs for which the sum of their large exposures is above 300% of their tier 1 capital (as part of the C-SREP process). The PRA has confirmed that its decisions in respect of cluster limit proposals will be finalised in a policy statement on the capital regime for SDDTs, expected in Q4. The PRA has also confirmed that it will delete the exemption from exposure limits for the UK FSCS (being the UK deposit guarantee scheme) in order to align the UK with international standards, and remove the G-SII and O-SII requirements relating to highly indebted French non-financial corporations, as the French macroprudential measure that inspired these requirements (the Haut Conseil de Stabilité Financière) has been withdrawn. The implementation date for the amended large exposures rules and related policy material is 1 January 2026.
