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Capital Requirements Regulation (CRR)
Article 372

Article 372 - Requirement to have an internal IRC model

Status
In force
Selected consolidated version from
30/09/2021
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Article 372

Requirement to have an internal IRC model

An institution that uses an internal model for calculating own funds requirements for specific risk of traded debt instruments shall also have an internal incremental default and migration risk (IRC) model in place to capture the default and migration risks of its trading book positions that are incremental to the risks captured by the value-at-risk measure as specified in Article 365(1). The institution shall demonstrate that its internal model meets the following standards under the assumption of a constant level of risk, and adjusted where appropriate to reflect the impact of liquidity, concentrations, hedging and optionality:

(a) 

the internal model provides a meaningful differentiation of risk and accurate and consistent estimates of incremental default and migration risk;

(b) 

the internal model's estimates for potential losses play an essential role in the risk management of the institution;

(c) 

the market and position data used for the internal model are up-to-date and subject to an appropriate quality assessment;

(d) 

the requirements in Article 367(3), Article 368, Article 369(1) and points (b), (c), (e) and (f) of Article 370 are met.

EBA shall issue guidelines on the requirements in Articles 373 to 376.

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