CRR (Basel 3.0)¶

The Capital Requirements Regulation (CRR) is the current regulatory framework for UK credit risk capital requirements. It implements Basel 3.0 standards and remains in effect until 31 December 2026.

Legal Basis¶

Key Features¶

1.06 Scaling Factor¶

All IRB RWA is multiplied by 1.06 (a 6% increase):

RWA_IRB = K × 12.5 × EAD × MA × 1.06

SME Supporting Factor¶

The SME Supporting Factor reduces RWA for qualifying SME exposures.

Eligibility Criteria (Art. 501): - Counterparty turnover ≤ EUR 50m (GBP 44m) - Exposure classified as Corporate, Retail, or Secured by Real Estate

Tiered Calculation (CRR2 Article 501):

Factor = [min(E, threshold) × 0.7619 + max(E - threshold, 0) × 0.85] / E

Where: - E = Total exposure to the counterparty - Threshold = EUR 2.5m (GBP 2.2m)

Example:

For a GBP 5m exposure:

Factor = [2.2m × 0.7619 + 2.8m × 0.85] / 5.0m
       = [1.676m + 2.38m] / 5.0m
       = 0.811 (18.9% reduction)

Infrastructure Supporting Factor¶

A 0.75 factor (25% reduction) applies to qualifying infrastructure project finance:

Eligibility Criteria (Art. 501a): - Project finance exposure - Exposure to an infrastructure project entity - Revenues predominantly in EUR/GBP or hedged (Art. 501a(1)(d))

RWA_adjusted = RWA × 0.75

Uniform PD Floor¶

All IRB exposures have a minimum PD of 0.03% (3 basis points):

PD_effective = max(PD_estimated, 0.0003)

No Output Floor¶

CRR does not apply an output floor. IRB RWA can be significantly lower than SA equivalent.

Risk Weight Tables¶

Sovereign Exposures (SA)¶

Institution Exposures (SA)¶

Corporate Exposures (SA)¶

Retail Exposures (SA)¶

Residential Mortgage Mechanism (Art. 125)¶

Art. 125 is a proportion-based split, not an LTV-band lookup. The 35% risk weight applies to the part of the loan up to 80% of property value; the remainder receives the counterparty's unsecured risk weight (75% for a retail borrower under Art. 123, or the applicable counterparty weight where the borrower is non-retail). Where the entire loan is within 80% of property value (LTV ≤ 80%), the residual is zero and 35% applies to the whole exposure.

secured_share = min(1.0, 0.80 / LTV)
avg_RW = 0.35 × secured_share + counterparty_unsecured_RW × (1.0 - secured_share)

Defaulted Exposures (SA)¶

Credit Conversion Factors (CCF)¶

CRR Art. 111 assigns CCFs to off-balance sheet items based on the four risk categories defined in Annex I. The maturity of undrawn commitments determines whether they fall into medium risk (50%) or medium/low risk (20%).

F-IRB Supervisory LGD¶

Unsecured Exposures (Art. 161(1))¶

Secured Exposures — LGDS (Art. 230 Table 5)¶

For collateralised exposures under the Foundation Collateral Method, the secured portion receives a reduced LGDS value:

CRM Haircuts¶

Financial Collateral Haircuts¶

Maturity Mismatch Formula¶

When collateral maturity < exposure maturity:

CRM_adjusted = CRM × (t - 0.25) / (T - 0.25)

Where: - t = Residual maturity of collateral (years, min 0.25) - T = Residual maturity of exposure (years, min 0.25)

Slotting Risk Weights (Art. 153(5))¶

UK CRR Art. 153(5) defines a single risk weight table (Table 1) with maturity-based splits, covering all specialised lending types (PF, OF, CF, IPRE).

Table 1 (PF, OF, CF, IPRE)¶

IRB Formulas¶

Capital Requirement (K)¶

K = LGD × N[(1-R)^(-0.5) × G(PD) + (R/(1-R))^0.5 × G(0.999)] - LGD × PD

Where: - N() = Standard normal cumulative distribution - G() = Inverse standard normal distribution - R = Asset correlation

Asset Correlation (Corporate)¶

R = 0.12 × (1 - exp(-50 × PD)) / (1 - exp(-50)) +
    0.24 × [1 - (1 - exp(-50 × PD)) / (1 - exp(-50))]

With SME size adjustment:

R_sme = R - 0.04 × (1 - (S - 5) / 45)

Where S = Annual turnover (EUR millions, capped at 50)

Maturity Adjustment¶

b = (0.11852 - 0.05478 × ln(PD))^2

MA = (1 + (M - 2.5) × b) / (1 - 1.5 × b)

Where M = Effective maturity (years, 1-5)

Configuration Example¶

from datetime import date
from decimal import Decimal
from rwa_calc.contracts.config import CalculationConfig

config = CalculationConfig.crr(
    reporting_date=date(2026, 12, 31),

    # SME Supporting Factor
    apply_sme_supporting_factor=True,

    # Infrastructure Factor
    apply_infrastructure_factor=True,

    # EUR/GBP rate for threshold conversion
    eur_gbp_rate=Decimal("0.88"),
)

Omitted Provisions¶

The following CRR articles were omitted from UK onshored CRR by SI 2021/1078 (effective 1 January 2022) and moved to the PRA Rulebook (CRR Part) or removed entirely. They are not active under current UK CRR:

Regulatory References¶

Next Steps¶

• Basel 3.1 - Future framework
• Framework Comparison - CRR vs Basel 3.1
• Calculation Methodology - Detailed calculations