[2025] UKUT 00185 (TCC)

Commercial immovable property (“CLIP”) loans were also secured by mortgages on commercial real estate; however, they were not to be repaid out of the income from that property but instead from some other source. On occasion, the acronym “CRE” included CLIP loans, but in this judgment we have sought to distinguish between the two.

Article 126 of the CRR provided that CLIP loans be assigned a risk weighting of 50%, but national regulators had the discretion under Article 124(2) to impose a higher risk weighting. On 1 January 2014, the PRA exercised that discretion and imposed a 100% risk weighting on CLIP Loans, unless the bank’s “annual average losses stemming from lending secured by mortgages on commercial property in the UK did not exceed 0.5% of risk-weighted exposure amounts over a representative period”. In that situation, the risk-weighting was 50%, see Rule 4.1 of the Credit Risk section of the PRA Rulebook.

Residential loans were, as the name indicates, secured on residential property. Article 125 of the CRR required that they be given a 35% risk weighting.