How does the ECB guide to internal models differ from TRIM?

In September 2018, the European Central Bank (ECB) published its draft version of the risk-type-specific chapters for the ECB guide to internal models, for consultation.

The guide aims to promote a consistent approach to the implementation of internal models and the final version is expected to be published in 2019.

We have prepared a short report highlighting the major differences with the earlier TRIM (Target Review of Internal Models) guide, concentrating on the three risk types:

  • Credit Risk – covering an internal ratings-based approach for calculating own funds requirements; data maintenance and specific modelling aspects, relating to estimation of probability of default, loss given default and conversation factor;
  • Market Risk – focusing on certain modelling aspects relating to back-testing of VaR models; VaR and stressed VaR methodologies; Risk not in model; and incremental risk charge methodology; and
  • Counterparty Credit Risk – including guidance on the qualitative and quantitative aspects of the Internal Model Method.

Read our full report.

Olivier Vincens | Director
Profile | Email | +44 (0)7841 071937

Read more articles on