April 03, 2019

ECB issued a letter on an interim update on the Targeted Review of Internal Models (TRIM). The note enclosed in the letter provides an overview of the TRIM project and shares aggregated information on its outcomes. The note complements the analysis on credit risk internal models, presents key findings related to the data quality review, and reports the most common or critical shortcomings identified during TRIM investigations on internal models for market risk.

The note contains background information on the objectives and timeline of TRIM and provides a high-level summary of the main achievements of TRIM. The note also provides a more detailed overview of the key insights that have emerged so far from the horizontal analyses conducted within TRIM. Finally, it summarizes the next steps within the project, along with the implications for internal model supervision beyond TRIM. The note highlights that, during 2019, the TRIM project will approach finalization.

  • First of all, ECB guide to internal models is being revised to take into account the feedback received during the public consultation process for credit, market, and counterparty credit risk. The consolidated version of the guide is expected to be published in the first half of 2019.
  • Additionally, TRIM on-site investigations will continue throughout the year. They are planned to be completed in the second half of 2019, with the finalization of the investigations on models for low-default portfolios.
  • Finally, looking forward after the end of TRIM, the outcomes of the project will continue to play a key role in improving the standards and quality of significant institutions’ Pillar 1 internal models and the related environment for using and maintaining them.

The note subsumes and complements the information already shared with the institutions within the scope of the project on June 11, 2018. Going forward, the note may be updated and expanded as necessary to reflect additional analyses conducted in the meantime.

 

Related Link: ECB Letter (PDF)

 

Keywords: Europe, EU, Banking, Internal Models, TRIM, Credit Risk, Market Risk, Counterparty Credit Risk, ECB

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