Permission to use the Internal Model Method
Provided that the competent authorities are satisfied that the requirement in paragraph 2 have been met by an institution, they shall permit that institution to use the Internal Model Method (IMM) to calculate the exposure value for any of the following transactions:
transactions in Article 273(2)(a);
transactions in Article 273(2)(b), (c) and (d);
transactions in Article 273(2)(a) to (d),
Where an institution is permitted to use the IMM to calculate exposure value for any of the transactions mentioned in points (a) to (c) of the first subparagraph, it may also use the IMM for the transactions in Article 273(2)(e).
Notwithstanding the third subparagraph of Article 273(1), an institution may choose not to apply this method to exposures that are immaterial in size and risk. In such case, an institution shall apply one of the methods set out in Sections 3 to 5 to these exposures where the relevant requirements for each approach are met.
present to the competent authority a plan for a timely return to compliance;
demonstrate to the satisfaction of the competent authority that the effect of non-compliance is immaterial.