Permanent Partial Use (PPU) Roll-Out
Designed and implemented the framework for determining the appropriate regulatory approach (A-IRB, F-IRB, SA) for credit risk across all exposure types at a European G-SIB — including governance, 20+ application forms, and the ECB approval package.
The Context
Banks using internal models for credit risk must assess which exposure classes and sub-classes qualify for A-IRB, F-IRB, or must revert to the Standardised Approach (SA). This Permanent Partial Use (PPU) exercise required the client — a European G-SIB with a large and complex credit portfolio spanning corporates, financial institutions, sovereigns, retail, and specialised lending — to conduct a comprehensive review of their regulatory approach across all exposure types and sub-types. The stakes were significant: incorrect classification could result in material RWA impact, and the ECB required a formal approval package demonstrating the bank's rationale, governance, and implementation roadmap. The project also included CRR Article 494d applications for the reversion to SA on exposure classes related to sovereigns, assimilated entities, RGLA (Regional Governments and Local Authorities), PSE (Public Sector Entities), and central banks.
Our Role
A PPU roll-out is not one decision — it is several hundred exposure-level decisions, each requiring a defensible trail back to pre-defined criteria. We deployed the Ezelman DELIVERY™ framework to stage the programme across 18 months.
DIAGNOSE
Gap analysis of every exposure class under CRR3 Art. 148-150. Materiality thresholds set early.
ENGAGE
JST pre-alignment sessions on contentious classes (sovereign-assimilated, RGLA) ahead of submission.
LEAD
Board-level sign-off on PPU philosophy: capital discipline over model preservation.
IMPLEMENT
20+ application forms built, each with quantitative impact, model evidence, 494d rationale where relevant.
VALIDATE
Independent validation on every A-IRB retention decision. SA reversions supported by empirical data.
EMBED
Internal credit-risk team owns the framework post-approval. Ezelman phased out at month 18.
REPORT
Approval package filed with full governance trail, executive summary, and sensitivity scenarios.
YIELD
Selective SA reversion on RGLA and sovereign-assimilated classes released capital previously trapped in IRB model buffers.
Framework Design
Designed the end-to-end PPU determination framework covering all exposure types and sub-types defined in CRR3. This included the decision methodology for A-IRB vs. F-IRB vs. SA assignment, materiality thresholds, data sufficiency criteria, model performance benchmarks, and regulatory text interpretation across ambiguous areas. The framework was designed to be auditable and defensible vis-à-vis the ECB.
Application Form Development
Drafted 20+ individual application forms for the ECB, each covering a specific exposure class or sub-class. Forms included regulatory rationale, quantitative impact analysis, model performance evidence, implementation timeline, and governance sign-off. Special attention was given to the CRR Article 494d applications for reversion to SA on sovereign-related exposure classes (sovereigns, assimilated entities, RGLA, PSE, central banks).
Governance & Approval Workflow
Established the internal governance framework for PPU decisions — including the approval committee structure, RACI matrix, escalation protocols, and documentation standards. Each PPU decision required sign-off from the CRO, Head of Model Risk, and Head of Regulatory Affairs before inclusion in the ECB package.
ECB Submission & IMI Engagement
Prepared the comprehensive ECB approval package submitted in September 2025, covering all exposure types. Subsequently managed the Internal Model Investigation (IMI) process — responding to ECB follow-up questions, providing supplementary evidence, and coordinating with internal teams to address supervisory feedback in real time.
Key Deliverables
PPU Determination Framework
Complete methodology document covering A-IRB / F-IRB / SA assignment criteria for all CRR3 exposure types and sub-types, with decision trees, materiality analysis, and regulatory interpretation guidance.
20+ ECB Application Forms
Individual application packages for each exposure class — regulatory rationale, QIS results, model performance evidence, implementation plans, and governance attestations.
CRR Art. 494d Reversion Applications
Specific applications for SA reversion on sovereign, assimilated, RGLA, PSE, and central bank exposure classes — including quantitative impact, transition plan, and regulatory justification.
Capital Impact Assessment
Comprehensive RWA and capital impact analysis across all exposure types under the proposed PPU configuration — including Output Floor interaction analysis and sensitivity scenarios.
Internal Governance Documentation
Committee terms of reference, LoD2 review, RACI matrix, decision logs, and escalation framework for the PPU programme — designed for ECB auditability.
ECB Approval Package
Consolidated submission package including all application forms, governance documentation, capital impact analysis, and implementation roadmap — submitted September 2025.
Results
The PPU programme delivered full ECB approval and zero rework — six outcomes the steering committee tracked from day one:
ECB approval package submitted
In September 2025, covering all exposure types.
20+ application forms
Drafted and approved through internal governance.
CRR Art. 494d applications
For SA reversion on sovereign-related classes — completed and submitted.
Full IMI engagement
Managed with real-time ECB follow-up coordination.
Zero rework
On application forms post-submission — all accepted by ECB on first review.
Framework adopted as template
By the bank for annual regulatory approach assessments.
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