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¶

Document	Reference
Primary Legislation	UK CRR (EU 575/2013 as onshored)
PRA Rules	PRA Rulebook - CRR Firms
Key Articles	Articles 111-191 (Credit Risk)

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

CRR Article 153

The 1.06 scaling factor was introduced to provide a buffer during the transition to IRB approaches. It is removed under Basel 3.1.

SME Supporting Factor¶

The SME Supporting Factor reduces RWA for qualifying SME exposures.

Eligibility Criteria: - 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)

Exposure Amount	Factor Applied
≤ EUR 2.5m	0.7619 (23.81% reduction)
> EUR 2.5m	Tiered blend

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: - Project finance exposure - Exposure to an infrastructure project entity - Revenues predominantly in EUR/GBP or hedged

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)¶

CQS	Risk Weight
CQS 1	0%
CQS 2	20%
CQS 3	50%
CQS 4	100%
CQS 5	100%
CQS 6	150%
Unrated	100%

Institution Exposures (SA)¶

CQS	Risk Weight
CQS 1	20%
CQS 2	30% (UK deviation from 50%)
CQS 3	50%
CQS 4	100%
CQS 5	100%
CQS 6	150%
Unrated	See due diligence approach

Corporate Exposures (SA)¶

CQS	Risk Weight
CQS 1	20%
CQS 2	50%
CQS 3	100%
CQS 4	100%
CQS 5	150%
CQS 6	150%
Unrated	100%

Retail Exposures (SA)¶

Type	Risk Weight
Retail - Residential Mortgage (LTV ≤ 80%)	35%
Retail - Residential Mortgage (LTV > 80%)	Risk-weight varies
Retail - QRRE	75%
Retail - Other	75%

Defaulted Exposures (SA)¶

Provision Coverage	Risk Weight
< 20%	150%
≥ 20%	100%

Credit Conversion Factors (CCF)¶

Item Type	CCF	Reference
Unconditionally cancellable commitments	0%	Art. 111(1)(a)
Short-term trade letters of credit	20%	Art. 111(1)(b)
Undrawn credit facilities	20%	Art. 111(1)(c)
Note issuance facilities	50%	Art. 111(1)(d)
Underwriting facilities	50%	Art. 111(1)(e)
Direct credit substitutes	100%	Art. 111(1)(f)
Acceptances	100%	Art. 111(1)(g)

F-IRB Supervisory LGD¶

Exposure Type	Senior Unsecured	Subordinated
Corporate/Institution	45%	75%
Secured - Financial Collateral	0%	N/A
Secured - Receivables	35%	N/A
Secured - CRE/RRE	35%	N/A
Secured - Other	40%	N/A

CRM Haircuts¶

Financial Collateral Haircuts¶

Collateral Type	Haircut
Cash	0%
Government bonds (≤1y residual)	0.5%
Government bonds (1-5y)	2%
Government bonds (>5y)	4%
Corporate bonds AAA/AA (≤1y)	1%
Corporate bonds AAA/AA (1-5y)	4%
Corporate bonds AAA/AA (>5y)	8%
Main index equities	15%
Other equities	25%
Currency mismatch	+8%

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))¶

CRR Art. 153(5) defines two risk weight tables with maturity-based splits.

Non-HVCRE (Table 1 — PF, OF, CF, IPRE)¶

Category	Remaining Maturity ≥ 2.5yr	Remaining Maturity < 2.5yr
Strong	70%	50%
Good	90%	70%
Satisfactory	115%	115%
Weak	250%	250%
Default	0%	0%

HVCRE (Table 2)¶

Category	Remaining Maturity ≥ 2.5yr	Remaining Maturity < 2.5yr
Strong	95%	70%
Good	120%	95%
Satisfactory	140%	140%
Weak	250%	250%
Default	0%	0%

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"),
)

Regulatory References¶

Topic	Article
Exposure classes	Art. 112
Risk weight assignment	Art. 113-134
IRB approach	Art. 142-191
Credit risk mitigation	Art. 192-241
SME supporting factor	Art. 501
CCFs	Art. 111

Next Steps¶

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