On 9 December 2024, the European Banking Authority (EBA) opened a public consultation on its draft Regulatory Technical Standards (RTS) aimed at refining and enhancing the conditions for assessing material model changes (MMC) and extensions. This move follows a review of the Delegated Regulation associated with MMC, aligning it with updates introduced by the Capital Requirements Regulation (CRR 3). The consultation will remain open until 10 March 2025.
Background
Under the CRR, institutions must seek approval from their competent authorities before implementing material changes or extensions to internal models used for calculating risk-weighted exposure amounts (RWEA). The Delegated Regulation (EU) No 529/2014 outlines the qualitative and quantitative criteria for distinguishing material changes requiring approval from those requiring only notification.
Key Enhancements
The consultation paper introduces the following updates:
- Alignment with CRR3: Refinements to match the new regulatory framework, including amendments related to the scope of models and approaches.
- Enhanced Supervisory Processes: Improvements to the criteria and mechanisms used by supervisors to approve material model changes.
- Clarifications on Materiality: Updates to qualitative criteria for material extensions and changes, and better guidance on quantitative backstop thresholds.
- Refinement of Notification Processes: Clearer differentiation between ex-ante and ex-post notifications for non-material changes, offering better guidance to institutions.
