ECB Delegates IRB Model Approval: What Changes for Banks in 2026

Key data

Significant banks in the eurozone directly supervised by the ECB obtain a relevant operational change: the approval of substantial modifications to their internal credit risk models (IRB models) no longer requires going through the highest governing bodies of the supervisor. The Decision (EU) 2026/2036 of the ECB, of 21 August 2026, formalizes the internal delegation of this competence to ECB executives, published in the EU Official Journal on 11 September 2026.

For the risk, capital and regulatory compliance teams of major European banks, this means a more agile supervisory process in one of the procedures with the greatest impact on regulatory capital management.

What does this regulation establish?

Significant banks under direct ECB supervision use models based on internal ratings—known as IRB models (Internal Ratings-Based)—to calculate how much capital they must reserve against credit risk. Any substantial modification of these models requires prior authorization from the supervisor.

Until now, these approvals had to go through the complete hierarchical chain of the ECB, reaching in relevant cases the Supervisory Board or the Governing Council. The new decision changes this scheme:

• The authority to approve substantial modifications to IRB rating systems is delegated to ECB executives.
• The need to escalate each relevant change to the highest collegial bodies of the supervisor is eliminated.
• The measure is part of the ECB's effort to optimize supervisory efficiency within the Single Supervisory Mechanism (SSM).

The regulation does not modify the substantive requirements that IRB models must meet to be approved, but rather the ECB's internal procedure for processing and resolving these requests.

Economic and operational impact

The impact of this decision is not minor for affected banks. IRB models directly determine how much capital a bank must reserve against its credit portfolio. An approval granted faster can translate into:

• Lower capital immobilization during the processing period, if the new model is more efficient in terms of own resources consumption.
• Greater agility in balance sheet management, by reducing uncertainty about when the new model calibration will be available.
• More predictable capital planning, as supervisor response times will be shorter and less dependent on the agenda of collegial bodies.
• Reduction of operating costs associated with preparing and maintaining modification files awaiting resolution.

From a regulatory risk perspective, delegation to ECB executives—rather than collegial bodies—may also imply greater technical specialization in the review, which some banks will value positively in terms of the quality of supervisory dialogue.

Who does it affect?

• Significant banks directly supervised by the ECB in the eurozone: these are the largest entities of systemic importance, subject to the Single Supervisory Mechanism (SSM).
• Credit risk and internal models teams of these entities: they manage the processes of validation and modification of IRB models before the supervisor.
• Chief Financial Officers (CFOs) and regulatory capital managers: the streamlining of the process directly affects the planning of own resources.
• Compliance and supervisor relations teams: they will need to update their protocols for interaction with the ECB in this type of procedure.
• Consultants and advisors specialized in banking supervision who accompany entities in model modification processes.

Less significant banks, supervised by national competent authorities (in Spain, the Bank of Spain), are not directly affected by this ECB decision.

Practical example

A significant Spanish bank—directly supervised by the ECB—decides to update its IRB model for the mortgage portfolio, incorporating new macroeconomic variables that reduce expected losses and, therefore, the associated capital requirements.

Under the previous scheme, the request for substantial modification had to be escalated to the ECB's Supervisory Board for approval, which meant adjusting to the agenda of that collegial body and assuming longer and more uncertain resolution periods.

With the Decision (EU) 2026/2036, that same request can be resolved directly by ECB executives with delegated authority. The bank obtains a faster response, can activate the new model sooner and adjust its capital planning with greater precision and in less time.

What should banks do now?

1. Review the pipeline of pending IRB model modifications: identify what requests for substantial changes are in preparation or in process and evaluate how the new delegation scheme affects them.
2. Update internal protocols for interaction with the ECB: the supervisory contact for these approvals will not necessarily be the Supervisory Board; teams must know the new channel and expected timelines.
3. Incorporate greater supervisory agility into capital planning: if there are IRB models whose approval was delaying balance or capital management decisions, this is the time to reactivate those processes.
4. Consult the full text of Decision (EU) 2026/2036: verify the exact scope of the delegation, the executives with assigned authority and the conditions or limits established in the regulation.
5. Coordinate with the legal and compliance team: ensure that internal procedures for requests and documentation before the ECB are adapted to the new procedural framework.

Official source

Consult full 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_202602036