Waivers: Model waivers

A model waiver enables a firm to apply an advanced prudential approach in calculating its capital requirements. This is different from that set out in the default standardised approach.

IFPR

Before considering the information on this page, please note that on 1 January 2022 a new prudential regime for UK investment firms authorised under MIFID (the Investment Firm Prudential Regime (IFPR)) will come into force.

This means: 

  • the majority of existing waivers and modifications to prudential rules in the FCA handbook will no longer apply
  • the majority of existing CRR permissions will no longer apply to FCA investment firms
  • the new rules contain transitional provisions that give some existing waivers and permissions status under the new regime − firms should consider the transitional provisions in the IFPR rules for more details
  • firms will need to consider applying for permissions, or rule waivers and modifications, of rules in the new sourcebook (MIFIDPRU)

Find out more about IFPR.

 

A firm can apply for any of the following model waivers (grouped by risk type):

Market risk

  1. CAD1 model approach
  2. Value at Risk (VaR) approach
  3. Repo VaR approach

Counterparty credit risk

  1. Internal Model Method (IMM) approach

Credit risk

  1. Internal Ratings Based (IRB) approach

Operational risk

  1. Advanced Measurement approach (AMA)

A firm that wishes to apply for a model waiver should speak to its Supervisor (if relationship managed) or the contact centre (if non-relationship managed) in the first instance.

There is a pre-application process whereby the FCA confirms the firm’s readiness to submit a waiver application. This includes the firm completing a self-assessment against the relevant prudential sourcebook and a rigorous assessment of the firm’s internal model. The firm will need to demonstrate that its risk controls and IT systems are appropriate for the nature and scale of its business.

Once the pre-application process has been completed, a letter will be sent to the firm to communicate the decision of the FCA including any conditions that need to be met. If successful, the firm will be requested to complete an online application form. Once the application has been processed by the FCA, a waiver will be issued to the firm.

We publish abridged waiver directions on the Financial Services Register, unless it is deemed inappropriate to do so (see SUP 8.6.1G).

There is a fee for applying for an IRB, IMM or AMA model approach. The relevant fees are set out the FEES section of the Handbook. The fee should be submitted with the application.

Page updates

27/07/2021: Information added Investment Firms Prudential Regime (IFPR)