Terms of Reference


Purpose

The purpose of the CRSG is to help the FSA formulate its policy prior to consultation, it does not replace consultation so may not definitively resolve any matters discussed.

The CRSG is a pre-consultation forum for discussing:

  • Credit Risk policy issues arising from the revised Basel Accord (Basel)and the Risk Based Capital Directive (RBCD);
  • the FSA's articulation of its potential solutions in Prudential Source Book (PSB) text;
  • issues regarding the practical implementation of, and monitoring of compliance with, Credit Risk policy in the PSB; and
  • domestic Credit Risk issues (e.g. IPRU) not covered by Basel or the RBCD.

The CRSG will be the medium by which the FSA will:

  • discuss its approach to, and process for, developing rules and to identify areas where guidance may need to be issued to implement the RBCD for Credit Risk;
  • collaborate with firms to develop it's Credit Risk policy in the PSB;
  • collaborate with firms to address issues of policy implementation, and the monitoring of compliance with, Credit Risk policy in the PSB; and
  • identify the substantive Credit Risk issues that need to be raised with the Basel Advisory Group and the PSB Advisory Group.

Remit

The CRSG will be responsible for:

  • the Standardised Approach to Credit Risk;
  • the Internal Ratings Based Approaches to Credit Risk;
  • Concentration Risk;
  • Counterparty Risk in the Trading Book;
  • IPRU Credit Risk issues; and
  • Pillar 2 adjustments for Credit Risk.

Credit Risk Mitigation and Securitisation issues are to be discussed at a separate Standing Group.

 

Composition


CRSG Composition Chart

 

Responsibilities

FSA


The FSA will:

  • ensure that issues raised by firms are given proper consideration, are discussed at the appropriate level within the FSA, and that appropriate action is taken to address them;
  • share with the CRSG members its policy proposals and rationale;
  • highlight and discuss implementation issues;
  • ensure that firms’ views on policy options are factored into the FSA’s on-going negotiation in respect of Credit Risk in Basel and the EU; and
  • ensure that firms receive feedback at the CRSG meetings on the way in which the issues they have raised have been factored into the FSA's policy.

Within five working days of a CRSG meeting, the FSA will:

  • circulate minutes from the meeting, comprising action points for the FSA and CRSG members; and
  • propose a draft agenda for the next meeting.

Within ten working days of a CRSG meeting, the FSA will:

  • publish on its website the final version of the CRSG minutes.

Five working days before a CRSG each meeting, the FSA will:

  • supply CRSG members with the agreed meeting agenda;
  • provide policy papers explaining the RBCD policy issues that the FSA is seeking to resolve and the proposed solutions to them.

 

CRSG members


The CRSG members are responsible for:

  • developing the CRSG agenda providing views on the appropriateness, and practicality, of the FSA’s proposed solutions to policy issues;
  • where proposals are considered inappropriate or impractical offering alternative solutions to policy issues in respect of RBCD credit risk implementation in the PSB;
  • reviewing, and providing suggestions for improvements to, Handbook text in respect of Credit Risk;
  • assisting the FSA in assessing the overall cost and benefits for UK firms of implementing proposals for credit risk.

 

Interaction with other FSA groups

Where an issue arises that requires senior level involvement from firms or the FSA, it will be referred up from the CRSG to one of the following FSA Advisory Groups:

  • the Basel Advisory Group, where it is a matter of policy; or
  • the PSB Advisory Group, where it is an issue of the way in which our policy is articulated in the PSB.

 

Meeting frequency

CRSG meetings will be held on monthly and ad hoc meetings may be held where necessary.

 

Circulation of CRSG papers

CRSG members are free to circulate papers within their organisations and, in the case of trade associations, around trade association members to gauge industry views.

Disclaimer

The papers and meetings of the group are intended to enhance continued discussion of the topics rather than to present a comprehensive account of the issues or a set of agreed conclusions. The minutes of the meetings report the discussions of the group, but neither the papers or minutes nor any reported remarks by anyone present at one of those meetings should be read as representing either the formal positions of the member institutions or of the FSA. The FSA's policy proposals will be subject to consultation in the normal way.