EBA streamlines supervisory approvals for IRB model changes

The European Banking Authority (EBA) has published the Regulatory Technical Standards (RTS) on material model changes to improve the efficiency of supervisory approval processes for banks using Internal Ratings Based (IRB) models.

The amendments aim to reduce the number of changes classified as material by recalibrating materiality criteria, relying more on quantitative thresholds, and limiting qualitative triggers to significant model redevelopments or risk parameter re-estimations. Routine model maintenance changes will generally require notification unless thresholds are exceeded.

The revised RTS align with changes introduced under the Capital Requirements Regulation III (CRR3), removing references to approaches no longer part of the prudential framework, such as the IRB approach for equity exposures and the Advanced Measurement Approach (AMA).

These updates are part of efforts to support more efficient supervisory procedures at both the European Central Bank (ECB) and national authorities, facilitating quicker IRB model approvals for EU banks.

The EBA’s work is mandated under Article 143(5) of Regulation (EU) No 575/2013 and aims to enhance the overall supervisory framework. The ECB has also announced progress in streamlining its approval processes for IRB model changes.