On 5 April 2019, the European Central Bank (ECB) published a note providing an interim update (dated 3 April 2019) on the targeted review of internal models (TRIM).
The purpose of the note is to provide an overview of the TRIM project and to share aggregated information on its outcomes. The note complements the information shared with institutions within the scope of the TRIM on 11 June 2018. The note may be updated in future as necessary to reflect additional analyses conducted going forward.
Section 1 of the note contains background information on TRIM’s objectives and timeline, and provides a high-level summary of the main achievements of TRIM on its way to reaching those objectives. Section 2 provides a more detailed overview of the main insights that have emerged so far from the horizontal analyses conducted within TRIM. Finally, Section 3 summarises the next steps within the project and some implications for internal model supervision beyond TRIM.
As regards next steps:
- the ECB guide to internal models is currently being revised to take into account the feedback received during the public consultation process for the risk type-specific chapters, and the consolidated version of this guide is due to be published in the first half of 2019;
- TRIM on-site investigations will continue throughout the year. They are planned to be completed in the second half of 2019, with the finalisation of the investigations on models for low-default portfolios;
- TRIM will then be concluded in early 2020;
- after the end of TRIM, the outcomes of the project will continue to play a key role in improving the standards and quality of significant institutions’ Pillar 1 internal models and the related environment for using and maintaining them; and
- intense follow-up work by the institutions is expected in the short term to remediate the shortcomings identified in the relevant decisions. In this regard, given the intense period ahead for internal model resources, institutions are encouraged to proactively plan and engage with Joint Supervisory Teams as early as possible.