Judgement-led approach to conduct risk capital draws criticism

Proposal by UK banking watchdog receives mixed initial response

The UK's Prudential Regulation Authority (PRA) looks set for a scuffle with the country's biggest banks over its proposal to use mostly "supervisory judgement" to determine how much capital they must put aside for conduct risk.

The methodology, outlined in a PRA consultation paper last month, treats conduct risk separately from non-conduct risk and is aimed at calculating additional Pillar 2A capital for the former. The document defines conduct risk as a Basel category of ‘Clients, products and