The PRA has published a policy statement setting out its updated requirements on the identification and management of step-in risk
The new rules – based on Basel Committee on Banking Supervision guidelines – require CRR firms and CRR consolidation entities to assess their step-in risk, namely the risk that a bank provides financial support to an unconsolidated entity facing stress in the absence of, or in excess of, any contractual obligations to do so.
Having considered responses to the consultation, the PRA has included a new Rule 6.2, which removes the requirement for a firm to consider its relationship with a third-party securitisation special purpose entity (SSPE) for step-in risk where its only relationship is an investment in its senior securitisation position. Firms should otherwise continue to include unconsolidated SSPEs within their step-in risk assessments.
The PRA has also published a supervisory statement setting out the factors it expects firms to consider when identifying potential step-in risk and deciding, where necessary, on potential mitigation action.
As proposed, the new rules and policy material on step-in risk will be implemented on 1 January 2026.