S.L. 370.47 Art. 10Ongoing review of permission to use internal models.

(1) The competent authority shall review on a regular basis, and at least every three years, investment firms’ compliance with the requirements for the permission to use internal models as referred to in Article 22 of the IFR. It shall in particular have regard to changes in an investment firm’s business and to the implementation of those internal models to new products, and review and assess whether the investment firm uses well‐developed and up‐to‐date techniques and practices for those internal models. The competent authority shall ensure that material deficiencies identified in the coverage of risk by an investment firm’s internal models are rectified, or take steps to mitigate their consequences, including by imposing capital add‐ons or higher multiplication factors.

(2) Where for an internal market risk model numerous overshootings as referred to in Article 366 of the CRR indicate that the model is not or is no longer sufficiently accurate, the competent authority shall revoke the permission for using the internal model or impose appropriate measures to ensure that the model is improved promptly within a set time-frame.

(3) If an investment firm has received permission from the competent authority to apply an internal model but no longer meets the requirements for applying those internal models, the competent authority shall require the investment firm to either demonstrate to the satisfaction of the competent authority that the effect of non-compliance is immaterial or present a plan and a deadline to comply with the requirements. The competent authority shall require improvements to that plan if it is unlikely to result in full compliance or if the deadline is inappropriate. If the investment firm is unlikely to be able to restore compliance within an appropriate deadline or has not satisfactorily demonstrated that the effect of non-compliance is immaterial, the permission to use the approach shall be revoked or limited to compliant areas or those where compliance can be achieved within an appropriate deadline.

(4) The competent authority shall take into account the analysis carried out by the EBA in terms of Article 37 of the IFD and the guidelines containing benchmarks on the basis of that analysis issued by the EBA, for the review of the permissions it grants to investment firms to use internal models.