#2026/491UK market risk capital rules get a one-year transition period
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This regulation gives banks and certain investment firms a one-year transition period before they must apply parts of the PRA’s new internal model rules for market risk capital requirements. From 1 January 2027 to 31 December 2027, affected firms must not apply specified PRA rules on permissions, model changes, and detailed internal model requirements. In practice, firms can keep using their existing market risk models during 2027 or move to new standardised approaches under the PRA rules. Compliance, risk, and capital planning teams should treat 2027 as a transition year and prepare for the full internal model framework unless the Treasury extends the period.
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Key Changes
- Creates a transitional period from 1 January 2027 to 31 December 2027 for market risk capital requirements.
- Prevents affected firms from applying specified PRA internal model approach rules during that transition period.
- Allows the Treasury to extend the transition period through further regulations.
Obligations
What this law requires
During the transitional period, credit institutions must not apply PRA Rulebook Market Risk: Internal Model Approach (CRR) rule 4.1 on transitionals when calculating capital requirements for market risk.
During the transitional period, Part 4A investment firms must not apply PRA Rulebook Market Risk: Internal Model Approach (CRR) rule 4.1 on transitionals when calculating capital requirements for market risk.
During the transitional period, credit institutions must not apply Article 325az on permission to use internal models, except paragraph A1, when calculating capital requirements for market risk.
During the transitional period, Part 4A investment firms must not apply Article 325az on permission to use internal models, except paragraph A1, when calculating capital requirements for market risk.
During the transitional period, credit institutions must not apply Articles 325azx to 325bp, including rules on material changes and extensions to internal model permissions and requirements for internal default risk models, when calculating capital requirements for market risk.