Glossary¶
| Term | Definition |
|---|---|
| RWA | Risk-Weighted Assets — credit exposures multiplied by risk weights to determine capital requirements |
| CRR | Capital Requirements Regulation (EU 575/2013 as onshored into UK law) — current Basel 3.0 implementation |
| Basel 3.1 | BCBS finalisation of Basel III reforms, implemented in UK via PRA PS1/26, effective 1 Jan 2027 |
| SA | Standardised Approach — risk weights assigned by exposure class and external rating |
| F-IRB | Foundation Internal Ratings-Based — firm provides PD, regulator sets LGD/CCF |
| A-IRB | Advanced Internal Ratings-Based — firm provides PD, LGD, EAD, CCF |
| Slotting | Specialised lending approach — risk weights by supervisory category (Strong/Good/Satisfactory/Weak/Default). See SlottingCategory and subgrades below. |
| SlottingCategory | The five-bucket supervisory grade enum (STRONG, GOOD, SATISFACTORY, WEAK, DEFAULT) defined in domain/enums.py. Under PRA PS1/26 Art. 153(5) Table A, the Strong and Good buckets are further refined into subgrade columns A/B and C/D; Satisfactory, Weak, and Default have a single column. See SlottingCategory and subgrades below. |
| CRM | Credit Risk Mitigation — collateral, guarantees, and provisions that reduce capital requirements |
| EAD | Exposure at Default — estimated exposure amount at the time of default |
| PD | Probability of Default — estimated likelihood of obligor default within one year |
| LGD | Loss Given Default — estimated loss as percentage of EAD if default occurs |
| CCF | Credit Conversion Factor — converts off-balance sheet amounts to on-balance sheet equivalents |
| CQS | Credit Quality Step — standardised rating scale (1=AAA/AA, 2=A, 3=BBB, etc.) |
| Output Floor | Basel 3.1 minimum: IRB RWA must be at least X% of SA-equivalent RWA |
| PRA | Prudential Regulation Authority — UK banking regulator |
| BCBS | Basel Committee on Banking Supervision — global standard setter |
| SME | Small and Medium Enterprise — turnover < EUR 50m, eligible for supporting factor |
Regulatory Definitions (PRA PS1/26)¶
Long-form regulatory definitions introduced by PRA PS1/26 Appendix 1 (effective 1 January 2027). Quoted verbatim from the PS1/26 Glossary unless marked otherwise.
Vehicle financing arrangement¶
PRA PS1/26 Glossary (Appendix 1, p. 27) — verbatim:
"vehicle financing arrangement means a loan, lease or other finance arrangement in respect of vehicle classes AM, A1, A2, A and B and B1 as specified in Parts 1 and 3 of Schedule 2 of The Motor Vehicles (Driving Licenses) Regulations 1999, provided that such arrangement does not qualify as an object finance exposure for the purposes of Articles 122A and 122B."
Plain English: Retail-style financing (loan, lease, or hire-purchase) for a passenger car, motorcycle, moped, or small van — i.e. a personal-use vehicle covered by an ordinary UK driving licence — provided the deal is not a corporate-style object-finance transaction caught by the SA specialised lending articles (Art. 122A) or the IRB specialised lending article (Art. 122B).
Where used in PS1/26:
- Art. 123(1)(b)(i)(2) — listed as an example of a "term loan or lease" that may qualify an SME exposure as a retail exposure under the Basel 3.1 SA exposure-class waterfall.
- Art. 123A(1)(b)(i) — listed as an example of a "term loan or lease" that may qualify a natural-person exposure as a regulatory retail exposure (eligible for the 75% / 45% risk weight rather than the 100% other-retail weight).
The definition is purely inclusive — it confirms that personal-vehicle finance is a permissible retail product type. It does not by itself trigger any specific risk weight; the eligibility tests in Art. 123(1) (granularity, GBP 880,000 threshold) and Art. 123A (regulatory-retail conditions) still apply.
Why the carve-out for object finance
The closing proviso ("does not qualify as an object finance exposure for the purposes of Articles 122A and 122B") prevents wholesale fleet-financing or commercial-vehicle leasing from being routed through the retail risk-weight tables when the cash flows are economically those of specialised lending. Where a vehicle deal meets the object-finance criteria — typically large commercial vehicles (HGVs, buses, aircraft — vehicle classes outside AM/A/B) financed primarily from the asset's revenue stream — it is captured by SA specialised lending (Art. 122A, slotted weights) or IRB specialised lending (Art. 122B, slotting approach) instead.
CRR comparison
CRR Art. 4(1) does not define "vehicle financing arrangement" — the concept is new in PS1/26. Under CRR, vehicle financing was implicitly covered by the generic "retail exposure" definition in Art. 123 without an explicit asset-class carve-out. The new definition aligns the UK retail boundary with BCBS CRE20.65, which lists "auto loans and leases" among the qualifying retail product types and excludes specialised vehicle lending.
SlottingCategory and subgrades A/B/C/D¶
SlottingCategory (src/rwa_calc/domain/enums.py) is the coarse five-bucket grade
enum used throughout the calculator for specialised lending exposures (PF, OF, CF, IPRE,
HVCRE):
| Member | Loader value | Plain meaning |
|---|---|---|
STRONG |
"strong" |
Highest supervisory category — strong financials, sponsors, contracts |
GOOD |
"good" |
Adequate margin against stress |
SATISFACTORY |
"satisfactory" |
Acceptable but vulnerable to downside |
WEAK |
"weak" |
Significant deterioration risk |
DEFAULT |
"default" |
Defaulted — 0% RW, capital captured via EL shortfall |
Where the A/B/C/D subgrades come from. PRA PS1/26 Art. 153(5) Table A (risk weights) and Art. 158(6) Table B (expected loss) split the Strong and Good buckets into two columns each:
- Strong → column A (concession) or column B (default)
- Good → column C (concession) or column D (default)
- Satisfactory, Weak, Default → single column (no subgrades)
The subgrade is not a separate input field — there is no slotting_subgrade column
on the loader. Instead the calculator derives the column from the exposure's residual
maturity and (for B31) HVCRE flag:
is_short_maturity = remaining_maturity_years < 2.5triggers column A / C under Art. 153(5)(d). This concession is implemented for CRR only; the B31 calculator currently routes all slotting exposures to column B / D regardless of maturity (tracked asIMPLEMENTATION_PLAN.mditems P1.97 non-HVCRE, P1.117 HVCRE).- The IPRE / PF enhanced-underwriting concessions in Art. 153(5)(e)–(f) are not implemented — there is no input field to mark an exposure as meeting those tests.
Where to find the actual numbers. Risk-weight values for each (category × subgrade × HVCRE) combination live in the canonical slotting specs — do not reproduce them here:
- Basel 3.1 Table A — Subgrade Treatment for risk weights (PRA PS1/26 Art. 153(5)).
- Basel 3.1 Table B — Slotting Expected Loss Rates for the EL ladder (PRA PS1/26 Art. 158(6)). Note: HVCRE EL collapses to a flat 0.4% across all four columns A/B/C/D for both Strong and Good — a documented PRA quirk.
- CRR Table 1 for the CRR pre-Basel-3.1
risk-weight equivalent (single table; no subgrade columns — maturity differentiation
is expressed as a separate
< 2.5yr/≥ 2.5yrsplit rather than A/B/C/D columns).
A practitioner-level walkthrough (input fields, worked example) is in the Specialised Lending user guide.