The BSA is pleased to provide its comments, and broad support, on/for the PRA’s proposals in CP 14/20 to floor UK mortgage IRB risk weights in around 12 months’ time. In representing the interests of all our members, we note arguments both for and against aspects of these proposals - reflecting their differential impacts. The great majority of the BSA’s 43 building society members use the standardised approach, and therefore indirectly benefit in competitive terms. (Standardised users object strongly to the present unlevel playing field, especially on residential mortgages – where the disparity in risk weights can be as much as a factor of seven.) But some of the largest societies, using internal models, could face disadvantage. And the context of parallel measures with cumulative effect is also important. Nevertheless we are prepared to support the CP 14/20 proposals and we suggest better ways to develop and refine them.
Read our full response here.