Featured Product

    ECB Completes Targeted Review of Internal Models of Banks

    April 19, 2021

    ECB published the results of the assessment of internal models that banks use to calculate risk-weighted assets for credit, market, and counterparty credit risks. This targeted review of internal models, or TRIM, is aimed to ensure that banks comply with rules and implement internal models consistently. The review confirmed that the internal models of significant institutions can continue to be used for the calculation of own funds requirements, provided they remediate the identified shortcomings within the given deadlines—that is, they restore full compliance with legal requirements. In the future, banks will need to continue to invest in high-quality models and, thus, it is particularly important that banks further strengthen their internal validation function.

    The review also concludes that further efforts and investments are expected to support institutions in deciding on their model strategies. Defining these internal model strategies will support institutions in the decision on the optimal use of time and resources invested in model development and maintenance and may lead to simplifications in the current model landscapes, as part of the preparation for upcoming regulatory developments. These developments foresee the decommissioning of some existing models—or to the corresponding necessary improvements also for some less material or less critical models. Going forward the positive experience and wealth of results from TRIM will bring long-lasting and sustainable benefits beyond the project itself, not least by helping institutions to be better prepared to face current and future challenges related either to economic shocks or to the adaptation of existing models to regulatory developments. The implementation of Basel III standards, through the amendments to the Capital Requirements Regulation (CRR), the regulatory review of the internal ratings-based approach led by EBA and the remediation of TRIM findings should provide complementary layers of safeguarding against inadequate internal models. Good internal models help to measure risk appropriately, thus better preparing banks to react and answer to economic shocks like the COVID-19 pandemic.

    The TRIM was a multi-year project launched by ECB at the beginning of 2016, in close cooperation with the national competent authorities that are part of European banking supervision. TRIM aimed to assess whether the Pillar I internal models used by significant institutions within the Single Supervisory Mechanism (SSM) are appropriate in the light of the applicable regulatory requirements and whether their results are reliable and comparable. Furthermore, TRIM aimed to harmonize supervisory practices for internal models in the SSM. With 200 on-site investigations conducted at 65 significant banks using internal models, TRIM is the largest project ever carried out by the ECB Banking Supervision. The findings communicated within TRIM have been followed up with binding supervisory decisions requesting the institutions to address these shortcomings. ECB identified over 5,000 findings and issued binding supervisory measures for banks to take corrective action within given deadlines. Through such measures, TRIM resulted in a 12% increase, or about EUR 275 billion, of risk-weighted assets for the investigated models. 

     

    Related Links

    Keywords: Europe, EU, Banking, TRIM, Internal Models, Credit Risk, Market Risk, SSM, Counterparty Credit Risk, Regulatory Capital, Basel, SSM, ECB

    Featured Experts
    Related Articles
    News

    EBA Publishes Final Regulatory Standards on STS Securitizations

    The European Banking Authority (EBA) published the final draft regulatory technical standards specifying and, where relevant, calibrating the minimum performance-related triggers for simple.

    September 20, 2022 WebPage Regulatory News
    News

    ECB Further Reviews Costs and Benefits Associated with IReF

    The European Central Bank (ECB) is undertaking the integrated reporting framework (IReF) project to integrate statistical requirements for banks into a standardized reporting framework that would be applicable across the euro area and adopted by authorities in other EU member states.

    September 15, 2022 WebPage Regulatory News
    News

    EBA Publishes Funding Plans Report, Receives EMAS Certification

    The European Banking Authority (EBA) has been awarded the top European Standard for its environmental performance under the European Eco-Management and Audit Scheme (EMAS).

    September 15, 2022 WebPage Regulatory News
    News

    MAS Launches SaaS Solution to Simplify Listed Entity ESG Disclosures

    The Monetary Authority of Singapore (MAS) set out the Financial Services Industry Transformation Map 2025 and, in collaboration with the SGX Group, launched ESGenome.

    September 15, 2022 WebPage Regulatory News
    News

    BCBS to Finalize Crypto Rules by End-2022; US to Propose Basel 3 Rules

    The Basel Committee on Banking Supervision met, shortly after a gathering of the Group of Central Bank Governors and Heads of Supervision (GHOS), the oversight body of BCBS.

    September 15, 2022 WebPage Regulatory News
    News

    IOSCO Welcomes Work on Sustainability-Related Corporate Reporting

    The International Organization of Securities Commissions (IOSCO) welcomed the work of the international audit and assurance standard setters—the International Auditing and Assurance Standards Board (IAASB)

    September 15, 2022 WebPage Regulatory News
    News

    BoE Allows One-Day Delay in Statistical Data Submissions by Banks

    The Bank of England (BoE) published a Statistical Notice (2022/18), which informs that due to the Bank Holiday granted for Her Majesty Queen Elizabeth II’s State Funeral on Monday September 19, 2022.

    September 14, 2022 WebPage Regulatory News
    News

    ACPR Amends Reporting Module Timelines Under EBA Framework 3.2

    The French Prudential Control and Resolution Authority (ACPR) announced that the European Banking Authority (EBA) has updated its filing rules and the implementation dates for certain modules of the EBA reporting framework 3.2.

    September 14, 2022 WebPage Regulatory News
    News

    ECB Paper Discusses Disclosure of Climate Risks by Credit Agencies

    The European Central Bank (ECB) published a paper that examines how credit rating agencies accepted by the Eurosystem, as part of the Eurosystem Credit Assessment Framework (ECAF)

    September 13, 2022 WebPage Regulatory News
    News

    APRA to Modernize Prudential Architecture, Reduces Liquidity Facility

    The Australian Prudential Regulation Authority (APRA) announced reduction in the aggregate Committed Liquidity Facility (CLF) for authorized deposit-taking entities to ~USD 33 billion on September 01, 2022.

    September 12, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8514