Member

63: After Clause 22, insert the following new Clause— “PRA rules: specialised risk weighting for employee ownership, co-operative and mutual transitionsAfter section 137G of the Financial Services and Markets Act 2000 (the PRA’s general rules) insert—“137GZA PRA rules: specialised risk weighting for employee ownership, co-operative and mutual transitions(1) In making rules relating to credit risk, capital requirements or the calculation of risk-weighted assets, the Prudential Regulation Authority must have regard to the desirability of recognising lending to small and medium-sized undertakings for the purpose of facilitating or supporting an employee ownership, cooperative or mutual transition as a prudentially distinct exposure class.(2) Rules made under this section may provide for specialised risk weights, risk-weighting factors, or exposure sub-categories for such lending where the PRA considers that the underlying risk characteristics justify differentiated treatment.(3) For the purposes of this section, lending that facilitates or supports an employee ownership, cooperative or mutual transition includes—(a) finance for the acquisition of shares by an Employee Ownership Trust, cooperative or mutual structure,(b) refinancing or restructuring of existing debt in connection with such a transition,(c) working capital or growth finance provided during or following such a transition, and(d) any other lending the PRA considers materially connected to the transition.(4) Nothing in this section shall be construed as requiring the PRA to set specific risk weights that are inconsistent with its primary statutory objectives.””Member’s explanatory statement This new clause enables the Prudential Regulation Authority to establish a specialised risk-weighting framework for lending that supports employee-ownership, cooperative, and mutual transitions, ensuring capital requirements appropriately reflect the lower risk profile and long-term stability of these ownership structures.