On 19 June 2026 the PRA published CP9/26 — adjustments to the internal model approach for market risk under Basel 3.1. The consultation closes 18 September 2026 and the changes are proposed to take effect on 1 January 2028, aligned with the UK’s IMA go-live under PS1/26. The proposals loosen the two quantitative gates that have kept trading desks off the IMA — the P&L attribution test and risk-factor eligibility — and restructure the treatment of non-modellable risk factors. Desks that shelved an IMA application on FRTB economics should re-run the numbers.
CP9/26 is a package of calibration changes, not a redesign of the FRTB. But the PLAT and risk-factor-eligibility moves change the arithmetic that decided most desks’ standardised-vs-internal-model choice.
P&L attribution test monitoring extends from one year to three, and test failures during that window no longer trigger automatic desk reallocation to the standardised approach. The single largest source of IMA cliff-risk is deferred.
For risk factors with liquidity horizons above 20 days, the verifiable-price requirement drops from 24 to 16, with pro-rated requirements for new issuances. Fewer factors fall out of the model into NMRF treatment.
Risk factors that fail the quantitative test but pass qualitative tests (Type 1) stay in the model with a capital add-on; only those failing both (Type 2) are excluded. NMRF calculations are simplified and move to monthly frequency.
Marginal adjustments recognise diversification between advanced-standardised and IMA portfolios, and hard caps are replaced with permission-based alternatives — a supervisory-dialogue lever, not an automatic one.
A 90% look-through threshold for collective investment undertakings, with extended treatment for index-tracking funds — removing a persistent operational blocker for funds-heavy books.
Alternative risk-factor coverage tests and guidance on desks for GIRR internal hedges. Small in capital terms; material in model-approval paperwork.
The risk-factor eligibility threshold falls by a third for less-liquid factors, and the PLAT consequence window triples — without the automatic reallocation penalty that made a marginal desk untouchable.
Source: PRA CP9/26 — Basel 3.1: adjustments to the internal model approach for market risk, 19 June 2026.
Most UK trading businesses concluded under CP16/22-era calibration that the IMA’s approval cost and PLAT cliff-risk outweighed the capital benefit. CP9/26 moves both inputs. The decision deserves a re-run on the proposed parameters — before the application queue forms ahead of January 2028.
EU FRTB own-funds requirements start on 1 January 2027 (CDR (EU) 2025/1496); the UK IMA arrives a year later. Groups running London desks will carry a split-calibration year across entities — a reconciliation burden the group market-risk function should plan for now, not discover in Q4 2027.
The replacement of hard caps with permission-based diversification treatment shifts value into the supervisory relationship. Banks that engage the PRA on portfolio structure during the consultation window — not after the policy statement — will shape their own treatment.
Dates, paragraph numbers and document versions verified at publication. Where consultations are still open, we flag draft status in text. Corrections: research@ezelman.com.
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