- The ECB is planning an update to its "Guide to Internal Models" in 2025, a key document that assists banks in using internal models to calculate their minimum capital requirements, a process that requires prior authorization from the competent authority. The 2025 update is necessary due to the upcoming implementation of the Capital Requirements Regulation (CRR3) on January 1, 2025, which incorporates the Basel III reforms into the EU’s prudential framework. CRR3 introduces significant amendments across various risk types, particularly credit risk, necessitating revisions to the current Guide to ensure it remains aligned with the latest regulatory requirements.
- Key elements of the upcoming 2025 revision include:
- Enhanced Transparency: Clarifying the ECB’s interpretation of regulatory requirements and providing additional supervisory perspectives to complement existing regulations.
- Consistency in Implementation: Ensuring harmonized application of regulatory standards across different banks.
- Refinements in Supervisory Assessments: Adjustments to supervisory expectations, particularly concerning the use of machine learning in internal models and the Fundamental Review of the Trading Book (FRTB) for market risk. To facilitate this update, the ECB will not conduct a public consultation but will instead host virtual round tables in late 2024 to gather feedback from banks on the main elements of the revision.
