On 19 April 2021, the European Central Bank (ECB) published a project report concerning a targeted review of internal models.
The targeted review of internal models (TRIM) was a multi-year project launched by the ECB at the beginning of 2016 in close cooperation with the national competent authorities (NCAs) that are part of European banking supervision. TRIM aimed to assess whether the Pillar I internal models used by significant institutions within the Single Supervisory Mechanism (SSM) are appropriate in the light of the applicable regulatory requirements and whether their results are reliable and comparable. Furthermore, TRIM aimed to harmonise supervisory practices relating to internal models within the SSM.
The content of the report is divided into four main subjects:
- An overview of the TRIM project, including its objectives, scope, structure and operational activities (Section 3).
- A summary of findings and key observations per risk type (Section 4).
- An overview of the supervisory follow-up (Section 5).
- A project review of TRIM, including achievements, lessons learned and recommendations (Section 6).
The TRIM project has led to detailed supervisory follow-up with the involved institutions. Institutions are expected to work intensely to address the findings raised and to ensure that these remedial actions also take appropriate account of the new requirements stemming from the EBA’s regulatory review of the Internal Ratings Based approach.