On 18 March 2022, there was published in the Official Journal of the EU (OJ), Commission Delegated Regulation (EU) 2022/439 of 20 October 2021 supplementing the Capital Requirements Regulation (CRR) with regard to regulatory technical standards (RTS) for the specification of the assessment methodology competent authorities are to follow when assessing the compliance of credit institutions and investment firms with the requirements to use the Internal Ratings Based (IRB) approach.

Under the CRR, credit institutions are permitted to use the IRB approach for the purposes of calculating their own funds requirements for credit risk, subject to the approval of competent authorities. Under Articles 144(2), 173(3) and 180(3)(b) of the CRR, the Commission has the power to adopt RTS specifying the process that competent authorities should follow when assessing credit institutions’ compliance with aspects of the IRB requirements.

The RTS provide a methodology for competent authorities when a credit institution:

  • initially applies to use the IRB approach;
  • applies to use the IRB approach for certain types of exposures in accordance with the sequential implementation plan;
  • applies for implementation of material changes to the IRB approach; and
  • applies to return to the use of less sophisticated approaches.

The Commission Delegated Regulation enters into force on the twentieth day following that of its publication in the OJ (7 April 2022).