Background
The PRA published the final rules and policy for the IMA in policy statement (PS) 1/26 – Implementation of Basel 3.1: Final rules as part of finalising its implementation of the Basel 3.1. In PS1/26, the PRA confirmed that, while the implementation date for most of the final Basel 3.1 rules and policy would be 1 January 2027, the implementation of the IMA would be delayed to 1 January 2028. The delay reflected continued uncertainty over the timing of the implementation of the Basel 3.1 market risk framework in some other jurisdictions.
Since publication of the final rules, proposals for implementation of the IMA have become clearer. In addition, the PRA has reviewed data from the Basel Committee on Banking Supervision’s Quantitative Impact Study and firms’ applications for IMA approval. As a result, the PRA is consulting on proposed adjustments to the IMA.
Summary
The PRA sets out that it is consulting on certain targeted adjustments to the market risk IMA rules and related materials finalised in PS1/26 and proposes the following changes:
- PLAT test: Extend the monitoring period for the profit and loss attribution test (PLAT) from one year to three years. During this period, the PLAT test will not be binding.
- RFET test: Adjust the risk factor eligibility test (RFET) by:
- reducing the number of required verifiable prices to pass the quantitative RFET from 24 to 16 for risk factors with a liquidity horizon of greater than 20 days; and
- introducing a proportionate RFET requirement for new issuances.
- NMRF framework: Introduce targeted adjustments and operational simplifications to the non-modellable risk factors (NMRF) framework by:
- Introducing a new category of NMRFs that satisfy qualitative data standards, but do not meet the quantitative verifiable price requirements (Type 1). Type 1 NMRFs would be included within the expected shortfall (ES) model. Reflecting that these risk factors do not have a sufficient number of verifiable prices, they would also be subject to an NMRF capital add-on, with an assumption of zero correlation between the risk factors. Risk factors that fail both the quantitative and qualitative requirements (Type 2) would continue to be capitalised as set out in PS1/26.
- Making a number of operational simplifications, including aligning the NMRF stress period with the stress period used for the expected shortfall (ES) model, reducing the calculation frequency for Type 2 NMRFs to monthly, and removing the distinction between idiosyncratic and non-idiosyncratic NMRFs.
- IMA approval: Reduce barriers to the gradual nature of IMA approval for any given firm by:
- recognising diversification between Advanced Standardised Approach (ASA) and IMA portfolios through a marginal ASA adjustment; and
- replacing the existing partial caps on IMA capital with a permission-based cap on IMA capital at the full ASA level.
- CIU treatment: Adjust the treatment of collective investment undertakings (CIUs) by introducing a 90% de minimis look-through threshold for IMA inclusion and extending the ASA treatment of index-tracking funds to IMA.
- IMA framework: Make a number of minor operational adjustments and clarifications to the IMA framework, including:
- clarifying the process for determining the own funds requirements for general interest rate risk internal hedges desks;
- providing IMA firms with the option to use alternative tests to assess the reduced set of risk factors, subject to notifying their respective PRA supervisors; and
- clarifying the treatment of listed closed-ended investment funds that also meet the definition of a CIU within the trading book boundary.
- Miscellaneous: Update reporting and disclosure obligations to align with the above proposals.
Next steps
The PRA has asked for responses to this consultation by 18 September 2026.