ECB 2026: who approves internal risk models in supervised banks

Key data

European banks directly supervised by the ECB must pay attention to a relevant procedural change: the Decision (EU) 2026/2037, published on 11 September 2026, modifies the ECB's internal rules on who can sign decisions approving or rejecting internal risk models. The amended regulation is Decision (EU) 2021/1442 (ECB/2021/38), which has been in force since 2021 regulating this delegation of powers.

The change does not alter the technical requirements that banks must meet for their models to be approved. What changes is the ECB's internal hierarchical structure for managing these files, with direct impact on timelines and the interlocutors that entities will have during the process.

What does this regulation establish?

Internal risk models allow banks to calculate their own capital requirements instead of applying the standard methods set by the regulator. Since these models directly determine how much capital an entity must maintain, their approval is one of the most critical decisions in banking supervision.

Until now, Decision (EU) 2021/1442 established under what conditions certain ECB officials could adopt these decisions without needing to escalate them to the full Supervisory Board. The new Decision (EU) 2026/2037 modifies those conditions, adjusting:

• The hierarchical levels or profiles of ECB officials authorized to adopt decisions on internal models by delegation.
• The specific conditions under which that delegation operates (types of decision, thresholds or specific scenarios).
• The rules on extension of timelines in internal model approval procedures.

In practice, the stated objective of the regulation is to streamline the ECB's internal administrative management, reducing bottlenecks that arise when all decisions must go through the full Supervisory Board.

Economic and operational impact

For significant credit institutions, this change has concrete operational consequences although it does not involve new direct costs:

• Resolution timelines: If the ECB streamlines internal delegation, model approval files could be resolved in less time. This is relevant for banks that have pending requests or plan to submit them.
• Interlocutors: Entities must verify with which hierarchical level of the ECB they interact in their active procedures, as the official competent to sign the decision may have changed.
• Extension of timelines: The new conditions for extending timelines in these procedures may affect the internal planning of banks that have open or about-to-expire files.
• Regulatory capital: Although technical standards do not change, any delay or acceleration in the approval of an internal model has direct impact on the capital requirements that the bank must maintain while the model is not approved.

Who does it affect?

• Significant credit institutions directly supervised by the ECB under the Single Supervisory Mechanism (SSM). These are large European banks with direct ECB supervision, not less significant banks supervised by national authorities.
• Prudential supervision and capital teams within affected banks, responsible for managing internal model files.
• Compliance and regulatory departments that monitor procedures before the ECB.
• Advisors and consultants specialized in banking supervision who support entities in internal model approval processes.

Less significant credit institutions, supervised by national competent authorities (such as the Bank of Spain), are not directly affected by this decision.

Practical example

A significant Spanish bank has an open file with the ECB for modification of its internal credit risk model. Under Decision (EU) 2021/1442, the resolution of that file required the decision to be adopted by a certain hierarchical level of the ECB or, in certain cases, escalated to the full Supervisory Board.

With the entry into force of Decision (EU) 2026/2037, the bank must verify two things: first, whether the ECB official with whom it has been coordinating the file remains the competent interlocutor to sign the final decision; and second, whether the timelines applicable to its procedure have been modified by the new extension conditions. If the bank had planned to receive a resolution within a certain timeframe, that timeframe could have been adjusted, which affects its regulatory capital planning for the coming quarters.

What should entities do now?

1. Review active files: Identify all approval or modification procedures for internal models that the entity has open with the ECB and verify whether timelines or interlocutors have changed.
2. Contact the ECB supervision team: Confirm with the Joint Supervisory Team (JST) assigned to the entity which official is now competent to adopt decisions in ongoing files.
3. Update regulatory capital planning: If there are pending internal model files awaiting resolution, review capital scenarios based on new foreseeable timelines.
4. Inform governing bodies: Communicate to the Risk Committee and Board of Directors the potential impact of timeline changes on the entity's capital position.
5. Consult the complete regulation: Read the full text of Decision (EU) 2026/2037 published in the EU Official Journal to identify specific changes compared to Decision (EU) 2021/1442.

Official source

Consult complete regulation in official source

Disclaimer: This article is for informational purposes only and does not constitute legal advice. For specific decisions, consult a qualified professional. Source: https://eur-lex.europa.eu/./legal-content/AUTO/?uri=OJ:L_202602037