Targeted Review of Internal Models

From Open Risk Manual

Definition

Targeted Review of Internal Models (TRIM) denotes a broad exercise performed by European Banking regulators[1] aimed at enhancing the credibility and confirming the adequacy and appropriateness of approved Pillar I internal models permitted for use by significant institutions when calculating own funds requirements

TRIM Components

Establish Compliance with regulatory requirements related to internal models, through an assessment based on the

  • Capital Requirements Regulation (CRR)
  • the Capital Requirements Directive (CRD IV)
  • relevant Commission Delegated Regulations and Commission Implementing Regulations
  • regulatory technical standards (RTS)
  • European Banking Authority (EBA) guidelines, and
  • the approved European Central Bank (ECB) Banking Supervision manuals and guidelines

Reduction of unwarranted variability in RWA as it relates to internal model outcomes, taking into account

  • the results of benchmarking
  • delivering interpretations of the CRR and
  • addressing current gaps in interpretation of regulations relating to internal models, in situations where significant modelling issues contributing to unwarranted variability have been identified.

References

  1. ECB guide to internal models − Credit risk, Sep 2018

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