These three risk type-specific chapters cover credit risk, market risk and counterparty credit risk. They are intended to ensure a common and consistent approach to the most relevant aspects of the regulations on internal models for banks directly supervised by the ECB. This follows the publication of the general topics guide (i.e. not risk type-specific) in November 2018.
The risk type-specific chapters provide transparency on how the ECB understands the regulations on the use of internal models to calculate own funds requirements for credit risk, market risk and counterparty credit risk.
The guide was drafted in close cooperation with the national competent authorities and draws on the experience gained in the context of the targeted review of internal models (TRIM) project. Before the public consultations were launched, banks provided feedback and, as part of the TRIM project, reviews and horizontal analyses were conducted. TRIM is a multi-year project which aims to make the implementation of internal models more consistent. It is essential to creating a level playing field for banks under ECB supervision.
The risk type-specific chapters, a feedback statement on the public consultation and the comments received from the industry are available on the ECB’s banking supervision website.
Link to Press Release - Click here.