In September 2020 we proposed in response two possible and complementary expectations on the level of modelled residential mortgage riskweights: (i) a risk-weight of at least 7% for individual mortgages; and (ii) an exposure-weighted average of at least 10% for the whole portfolio.5 We’ve now received the responses to our consultation, including some very helpful and detailed data submissions. As we speak, the PRA team is forensically considering all this information to assess the likely impact of our proposals against our original assessment – including whether both floors are needed, the exact calibration, and the timing of any implementation. Four points stand out so far. First, there is a strong prudential case for some minimum expectations on model risk-weights. Given the capital held on modelled mortgages that stems from risk-weights has decreased by more than a third in the last decade, you should not be surprised to hear me say this. Second, in addition to the prudential benefits, such floors should in my view benefit competition between larger firms on modelled and smaller firms on nonmodelled approaches, an issue our competition team has been alert to for some time. Third, however, it is not yet clear whether both floors are needed, or what exactly the right calibration is, as it is not the intention of the policy to significantly increase capital across all mortgage providers; the new data we’ve received will help us expand our assessment on this point.
The euro is now used worldwide, with around 15 billion notes in circulation worth over 900 billion euros in all. That’s broadly comparable to the total value of the US dollar bills, no mean feat in just 12 years. Today is also a chance to highlight the importance of maintaining people’s trust in the euro. One of the main reasons for introducing a new series of notes is to ensure that everyone who uses them can continue to do so with complete confidence. That’s why we have drawn on a number of new technologies to modernise the security features, making the notes even more resistant to counterfeiting. In addition, the new banknotes have an innovative coating that makes them more durable than the first series. The five euro and ten euro notes are not always treated kindly. By protecting them better, we can prolong their service life and reduce their environmental impact. The new ten is the second note in the Europa series and follows the new five, which started circulating in May last year. As I’m sure you’ll agree, the note you’re going to see is instantly recognisable as a ten. It certainly resembles the ten euro notes you have in your pockets, with its distinctive Romanesque architecture. However, perhaps it will have more of a visual impact, as the images are larger and more defined, the colours are stronger and the bridge has added depth.