In the latest edition of Sullivan Worcester’s breakfast seminar, partner Mark Noriss discusses the consultation paper published by the Prudential Regulation Authority (PRA) in February which sets out proposed updates to its supervisory statement on credit risk mitigation (CRM).

The paper attempts to clarify the PRA’s expectations regarding the eligibility of guarantees as unfunded credit protection under the capital requirements regulations.

The proposal raises a number of serious concerns and may not reflect how banks, insurers, ECAs and legal counsel have either applied, or understood, the relevant rules up until now. There is widespread concern among lenders, insurers and UK exporters that the proposed clarification will render ineligible CRMs which are widely used to support trade and export finance.