meta_id 3253492

On June 19, 2026, the Prudential Regulation Authority (PRA) published Consultation Paper 9/26, proposing targeted adjustments to the Basel 3.1 internal model approach (IMA) for market risk. The consultation addresses calibration and operational issues identified since the PRA finalised its IMA rules in Policy Statement 1/26, which confirmed an implementation date of January 1, 2028. The PRA's proposals reflect evidence gathered from firms, data from the Basel Committee on Banking Supervision's (BCBS) Quantitative Impact Study, and increased clarity regarding implementation approaches in other major jurisdictions. The consultation applies to PRA-authorised banks, building societies, PRA-designated investment firms, and financial holding companies, particularly those with existing IMA approval or considering IMA adoption. The seven proposals include: extending the profit and loss attribution test (PLAT) monitoring period from one to three years, during which PLAT failures would not automatically trigger reallocation to the standardised approach; reducing verifiable price requirements for the risk factor eligibility test (RFET) from 24 to 16 for risk factors with liquidity horizons exceeding 20 days; introducing a new intermediate category of non-modellable risk factors (Type 1) that fail quantitative but pass qualitative tests, allowing these to remain in expected shortfall models with capital add-ons; recognising diversification between Advanced Standardised Approach (ASA) and IMA portfolios; simplifying collective investment undertakings (CIUs) treatment through a 90 percent look-through threshold; and making minor operational clarifications. The PRA estimates annual benefits to firms between £1.8 million and £60 million, primarily from increased IMA adoption and NMRF framework changes. The proposals maintain robust prudential standards while improving proportionality and operational effectiveness, supporting UK competitiveness in wholesale financial markets. The consultation closes on September 18, 2026. Responses should be submitted to CP9_26@bankofengland.co.uk or addressed to Darren Massey, Market and Counterparty Credit Risk Policy Team, Bank of England, Threadneedle Street, London EC2R 8AH.