CP9/26 – Basel 3.1: Adjustments to the internal model approach (IMA) for market risk
AI Analysis
The PRA has issued CP9/26, a consultation on targeted adjustments to the **Basel 3.1 market risk Internal Model Approach (IMA)** that was finalized in PS1/26. The main compliance significance is that it refines how firms can use market risk models, including capital caps, collective investment undertaking treatment, reporting/disclosure, and other operational clarifications, while preserving the PRA’s objective of robust model standards and closer international consistency.
Key dates
- 20 January 2026
- - PS1/26 finalized the PRA’s market risk IMA rules that this consultation seeks to adjust
- 19 June 2026
- - CP9/26 is in force as an open consultation for industry response
- 18 September 2026 Deadline
- - Consultation responses are due to the PRA
Suggested considerations
- Review the proposed IMA amendments in CP9/26 against current Basel 3.1 implementation plans and identify where trading desk, model, and capital calculations would change.
- Assess whether any current or planned IMA portfolios would be affected by the proposed permission-based cap at the full ASA level.
- Recalculate the implications of the proposed 90% CIU de minimis look-through threshold for portfolio classification and capital treatment.
- Check whether index-tracking fund positions should be re-mapped under the proposed extension of ASA treatment to IMA.
- Update reporting and disclosure implementation workstreams to reflect the PRA’s proposed alignment changes.
- Validate whether any reduced-risk-factor modelling strategy can satisfy the proposed 75% variability coverage expectation and whether PRA notification would be required.
What changed
- - The PRA is consulting on a targeted set of adjustments to the market risk IMA rules and related policy materials that were finalized in PS1/26.
- The proposals include replacing the existing partial caps on IMA capital with a permission-based cap on IMA capital at the full ASA level.
- The PRA proposes to adjust the treatment of collective investment undertakings (CIUs) by introducing a 90% de minimis look-through threshold for IMA inclusion.
- The PRA proposes to extend the ASA treatment of index-tracking funds to IMA.
- The PRA proposes to update reporting and disclosure obligations so they align with the revised IMA framework.
- The PRA proposes additional minor adjustments and clarifications to improve risk sensitivity and remove ambiguity in the IMA framework.
Compliance impact
The compliance impact is material but targeted: firms using, or planning to use, the IMA must update model governance, capital methodology, and reporting/disclosure processes to match the revised framework. Failure to adapt could lead to miscalculated market risk capital, supervisory challenge, delayed approvals, or remediation expectations if a firm relies on outdated IMA assumptions.
Who is affected
References
AI-generated analysis. May contain errors or omissions — verify with the original PRA source before acting. Full disclaimer.
What the PRA said
Consultation paper 9/26
Published by PRA . Read the full notice at the source for the authoritative text.