2.1 This chapter sets out the PRA’s expectations regarding the calculation of additional own funds for the purposes of Article 325az(4) of the Market Risk: Internal Model Approach (CRR) Part of the PRA Rulebook, which applies where a firm has permission to calculate own funds requirements for one or more categories of market risk under Market Risk: Internal Model Approach (CRR) Part. It requires firms to identify any risks which are not adequately captured by those models and to hold additional own funds against material risks. The methodology for the identification of those risks and the calculation of those additional own funds for internal model approach (IMA) models is referred to as the ‘(risks not in models) RNIM framework’.

2.2 Firms are responsible for identifying these additional risks, and this should be seen as an opportunity for risk managers and management to better understand the shortcomings of the firm’s models. Firms are expected to validate the appropriateness of the RNIM framework.

Scope of the Risks not in Models (RNIM) framework