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June 19, 2017

The PRA published an updated internal ratings based (IRB) approach Capital Requirements Regulation (CRR) Permission application pack. This application pack should be used by institutions applying under Article 143 of CRR for permission to use the IRB approach to calculate risk-weighted exposure amounts for credit risk.

The application process is modular and eight separate forms need to be completed for each module of the application process. The IRB application process has been split into three phases made up of eight modules. These modules are Scoping (Module 1), Technical model reviews (Module 2), IT and Data (Module 3), Use test and experience test (Module 4), Permanent partial use and roll out plans (Module 5), Financial reporting and stress testing (Module 6), Internal audit and independent validation (Module 7), and Governance (Module 8). Each module covers a different aspect of a firm’s plans for IRB implementation and applicants are required to provide a response to all of the questions in each module. Each module submitted to the PRA must be signed off by the firm's CEO or other appropriate senior manager, as agreed with the supervisory team.

 

Applicants will initially need to submit a completed application form for Module 1, with responses to requests for information contained in the module (the PRA may request further information, including additional documentation, at a later stage). Review process of the PRA is designed to establish compliance with the CRR, assess prudential risk, and ensure a consistent treatment for all firms. The PRA has the power to exercise various national discretions given to the competent authority under the applicable articles of the CRR and these are referred to as “CRR Permissions.”

 

Related Links

CRR Permissions Application Pack (PDF)

Application of CRR Permissions

CRR Permissions

Keywords: Europe, UK, PRA, Banking, CRR, National Discretion, IRB Approach

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