Fundamental Review of the Trading Book (FRTB): Timetable for submission of internal model/standard approach pre-applications
The Basel 3.1 framework removes the existing IMA methodologies, replacing them with a completely new framework. Subject to finalisation of the draft rules and the results of the forthcoming consultation, we expect existing internal model permissions for market risk to become redundant (as part of the legislative changes required to bring in Basel 3.1 in the UK). Given the new market risk rules introduced by FRTB are substantially different to the current rules, it is not currently our intention to consult on any temporary extension of the existing modelling regimes or permissions. Therefore, current IMA firms would automatically move to the new standardised approach (SA) when the new rules are implemented, unless they had been granted a new IMA permission under FRTB by
us.
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In order to allow sufficient time for us to review and come to a decision on prospective model applications ahead of the assumed implementation date, and to ensure that any new IMA permissions are effective on or about the implementation date, we would expect firms to submit final pre-application materials at least 12 months in advance of this, ie by Monday 1 January 2024. We would then assess such pre-application materials ahead of formal confirmation of the permission once the relevant rules come into force (where a decision to grant internal model approval is taken).
The full letter is available at https://www.bankofengland.co.uk/-/media/boe/files/prudential-regulation/letter/2022/june/frtb-implementation.pdf