The capital requirements of market risk positions in accordance with CRR are currently based on two different approaches. In principle, own funds requirements are calculated using a standardised approach specified by the supervisory authority (Art. 326 - 361 CRR). Upon request, institutions can also use an internal model for this purpose if certain requirements set out in the CRR are met (Internal Model Approach - IMA; Art. 362 - 377 CRR). However, this requires the prior authorisation of the competent supervisory authority. The IMA is primarily used by large, internationally active institutions.

BaFin and Bundesbank generally base their interpretation of the CRR requirements for internal models on the ECB guide to internal models (EGIM) (available here).

The guide was prepared in close cooperation with the national competent authorities of the Single Supervisory Mechanism and is intended to ensure a common understanding of the existing legal framework for internal models.

The current version from February 2024 contains revisions that reflect the supervisory authority's experience with using the guide.

The CRR regulations are supplemented by regulatory technical standards, implementing technical standards and guidelines.

Since the Fundamental Review of the Trading Book (FRTB) of the market risk regulations by the Basel Committee (published in January 2019), the new market risk framework has been implemented in stages in the EU. The FRTB reporting obligation for banks with material market risk positions (above the thresholds defined in Art. 325a CRR) has been in force since September 2021.

The CRR3 published in June 2024 for determining capital requirements provides for three different approaches. A new addition is the alternative standardized approach (ASA; Art. 325a-325ay CRR), which must be applied once certain thresholds are exceeded (see Art. 325a CRR). It acts as an intermediate link between the previous standardised approach and the future alternative internal models approach (AIMA; Art. 325az-325bp CRR). In addition, stronger supervisory and internal bank review processes are planned for this approach (Art. 325c CRR3).

The AIMA is characterised, among other things, by a change in the risk measure (expected shortfall instead of value at risk). While the previous standardised approach will be continued in a slightly modified form (supplemented by scaling factors) as a simplified standardised approach, the previous IMA will lose its validity following the introduction of the AIMA and will no longer apply.

The new regulations will come into force on 1 January 2025. However, this start date is to be postponed to 1 January 2026 by a delegated act of the EU Commission on the basis of Art. 461a CRR. A corresponding draft was published on 24 July 2024.[¹]

At the same time, certain regulations on the boundary between the trading book and the banking book and internal risk transfer will be postponed by a no-action letter from EBA in order to avoid an inconsistent entry into force of the FRTB regulations. In addition, another complementary document is intended to clarify important questions of interpretation in the context of the postponement.[²]

[¹] The EU Commission's communication of 24 July 2024 comprised three elements:
Press release
Q&A document (Memo)
Delegated Act
[²] EBA communication including no-action letter and interpretative communication:
The EBA responds to the European Commission’s Delegated Act postponing the application of the market risk framework in the EU | European Banking Authority (europa.eu)