play an important role, and there are independent cases for the reform of both. we have set out our main concerns with the existing ma framework, including in the recent discussion paper ( dp ) we published alongside hm treasury ’ s consultation document [ 7 ]. these can be broadly summarised as 1. the fundamental spread ( fs ) does not capture all retained risks and is generally low, 2. the fs is not sensitive to differences in risks between assets and 3. the fs does not adjust to shifts in the credit environment unless a default or downgrade has occurred. we have also expressed concern regarding the size of the risk margin, and its sensitivity to low interest rates. however, given the interaction between the ma and the risk margin on balance sheets, we cannot look at potential reforms in isolation. in order to maintain transfer values in line with observed prices, the calibration of changes have to be considered as a package. undertaken in isolation, a large cut to the risk margin would fail this simple test, and would increase the risk that an insurer ’ s liabilities could not be transferred to a third party if it were to fail. this would expose policyholders to an unacceptable risk and would be incompatible with the fundamental principles behind the solvency ii regime. but the detail of individual measures needs to be right too, to avoid perverse incentives which may lead to unintended consequences. when we started exploring reforms to the ma last year, stakeholders raised concerns about the potential for increased volatility in balance sheets. our interaction with firms has helped to develop our thinking. in our dp, we outlined a new, less volatile design for the credit risk premium ( crp ) component of the fs, and last week launched a targeted data collection exercise [ 8 ] to help understand the impact of that design, and various calibration choices that might be made within it. the aim is to achieve a valuation representing an accurate transfer value of matched portfolios of liabilities and credit assets, as well as the solvency capital requirement ( scr ) acting to absorb changes in those transfer values in a 1 - in - 200 stress over one year. this outcome is of the utmost importance for a tailored uk regime, given the nature of the products offered and the breadth of credit invested in by insurers. in the dp, we set out the pra ’ s current views about the overall calibration of the crp, including features such as

feel high to mid - tier firms that are not designated as systemic and, on the face of it, appear to engage in lower risk activities. the third link between the two reviews is that both reviews are also considering the scope of each framework. when the prc and fpc finalised their leverage ratio framework in 2015 we decided to apply the framework to our largest and most systemic firms and return to the question of whether to include other firms in scope in the future. on the one extreme, the prc and fpc might now decide that the current scope of the framework has served us well, and that it is enough for prc to continue with its leverage ratio supervisory expectations that currently apply to all firms. on the other extreme, the prc and fpc might decide that there is benefit in extending the leverage ratio framework to all pra firms, whether from a micro - prudential or a system - wide perspective. similarly, the bank ’ s mrel review is considering the thresholds for being subject to a resolution strategy requiring use of the bank ’ s stabilisation powers, and in connection to that the resulting mrel calibration for mid - tier firms. these links and their implications for the different reviews are being closely coordinated across the three authorities – the prc, the fpc and the resolution authority. no decisions have been made on either, but i expect all three authorities to be saying more on these reviews over the summer – so watch this space. mortgage risk - weights finally, i want to close with something that i hope is of interest to both the larger and smaller firms in our audience. last time i was here, i spoke about the significant decline in uk mortgage risk - weights for firms using internal models – from an average of around 15 % in 2009 to around 10 % today. this has led to increased prudential risks, and an increasing divergence between firms that use these models and firms that do not. 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