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# ECB Accelerates Bank Model Approvals With Post-Implementation Reviews
- URL: https://www.theglobalbanker.com/ecb-accelerates-bank-model-approvals-with-post-implementation-reviews/
- Published: 2026-03-30T12:33:29.000Z
- Updated: 2026-10-01T23:24:59.000Z
- Description: The European Central Bank is overhauling its supervision of banks' internal credit risk models, shifting to faster approvals while maintaining safeguards through capital floors and targeted on-site investigations.
- Author: TGB Editorial Team
- Tags: Regulations, Europe

The European Central Bank is streamlining how it assesses changes to banks' internal models for credit risk, moving from an ex ante to an ex post assessment in a reform designed to make approvals faster and more predictable, subject to safeguards to keep banks resilient. The new approach applies from 1 October 2026.

Under the new framework, banks will be able to implement material changes to their internal models for credit risk shortly after submitting a complete application package, provided their internal control functions credibly confirm that the revised model complies with regulatory requirements and that the bank is ready to implement the change. This marks a departure from the ex ante approach, under which supervisors reviewed changes before they took effect; the ECB says banks will no longer have to maintain old and new models in parallel while awaiting supervisory review.

#### SAFEGUARDS EMBEDDED IN REFORM

The ECB has built safeguards into this accelerated process to keep banks resilient. Where model changes result in lower risk weights—and thus lower capital requirements—banks receive fast approval to implement the new model, but the regulatory capital benefit will be constrained by a floor. Such a floor will be applied to all approved model changes and can be lifted only once the ECB has thoroughly assessed the features of the new model through a targeted on-site investigation. For sensitive cases, the ECB retains the option to follow the standard approval process, requiring banks to await the outcome of a dedicated on-site investigation before implementation.

The reform builds on several years of supervisory work to make banks' internal models more reliable and consistent. In 2025, the ECB conducted 74 on-site investigations of internal models, with more than 90 percent triggered by initial model approvals or material changes, including changes to address findings from previous ECB reviews. Under the new regime, material model changes will no longer automatically trigger investigations, freeing supervisory resources for higher-risk areas.

#### RISK-BASED SUPERVISORY PIVOT

The ECB is shifting toward a more proactive, risk-based supervisory approach. On-site investigations will now focus primarily where higher risks warrant closer scrutiny, such as models exhibiting outlier behaviour in horizontal analyses or those that may show weaknesses in a changing macroeconomic environment. This allows the ECB to supervise these models in a more targeted and risk-based manner.

Complementing this supervisory evolution, the European Banking Authority released a revised Regulatory Technical Standard for assessing the materiality of changes to internal models for credit risk. The EBA recalibrated the materiality criteria, with greater reliance on quantitative thresholds and more targeted qualitative triggers. This substantially reduces the number of changes classified as material, and therefore subject to ECB approval, while preserving appropriate supervisory visibility.

#### STRATEGIC PORTFOLIO FOCUS

The ECB continues to encourage banks to focus their internal models on strategic loan portfolios and to switch to the standardised approach when the models apply to small portfolios, rely on limited representative data, require high operational effort or are expensive to maintain. 

Faster approval of internal models is one of the key areas for reform that the ECB identified as part of its "Next-level supervision" project. 

For banks, the ECB says the reform makes the approval process for material model changes faster and more predictable. For supervisors, it frees up resources to focus on-site work where higher risks warrant closer scrutiny. The reform forms part of the ECB’s agenda to streamline banking supervision while maintaining high supervisory standards and safeguarding resilience.