To avoid any potential bottlenecks in the process, policy makers are considering allowing banks to use their U.K.-approved internal risk models for an extended period until euro-area regulators are able to hire more staff and perform their own assessments, said one of the people, who asked not to be identified because the deliberations are private. No formal talks have taken place and no decisions reached, the person said. [...]
There is precedent for the so-called grandfathering of model approvals. When the ECB assumed its oversight role in 2014 it didn’t initially authorize models, relying instead on the previous judgments of national supervisors. It only began a review -- still ongoing -- of the thousands of risk models nearly two years ago.
"Grandfathering the risk models would be the most logical approach," said Jan Putnis, a partner at law firm Slaughter and May in London. "There is no real alternative in the short term. But this will require close co-operation between regulators, not least because the models might require adjustment during the grandfathering period. These arrangements could become very complicated."
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