On 15 November 2018, the European Central Bank (ECB) has published the general topics chapter of its guide to internal models (the Guide), together with a feedback statement to the ECB’s March consultation on the chapter (the Statement). The Guide provides transparency on how the ECB understands the general (i.e. non-model-specific) topics for internal models, in particular for the internal ratings-based (IRB) approach. Section 2 of the Guide (overarching principles for internal models) covers all Pillar 1 internal models for credit, market and counterparty credit risk, all subsequent sections (implementation of the IRB approach, internal governance, internal validation, internal audit, model use, model change management and third-party involvement) only cover credit risk Pillar 1 models. All other models, including operational risk models, Pillar 2 and managerial models are not included in the scope of the Guide, unless otherwise mentioned. The Guide should not be…
Read more detail on Recent Banking and Finance Law posts –