Amongst mortgage lenders, variations in banks' Risk Weighted
Assets (RWAs) are observed in the market. This information is
published in firms' Pillar 3 disclosures, as well as by the
Prudential Regulation Authority (PRA). As an example, in January
2015 the PRA reported performing risk weights ranging from 10.8% to
14.6% for performing residential mortgages with 70%-80% Loan To
Value (LTV) amongst firms using the Internal Ratings Based (IRB)
approach to calculating RWAs. The variations lend credence to a
distrust of banks' internal models by regulators, shareholders
and the general public.
The PRA has issued Consultation Paper CP29/16, in which updates
to Supervisory Statement 11/13 (SS11/13) are proposed. CP29/16
expands the PRA's expectations of compliant approaches, with
key points including:
