3A.1 Firms intending to use sensitivity models to calculate the positions on derivative instruments covered in Articles 328 to 330 of the Market Risk: Simplified Standardised Approach (CRR) Part are expected to demonstrate that they meet the requirements for granting of the relevant permission by providing the PRA with confirmation that they meet the minimum standards set out in paragraphs 3A.3 to 3A.9 below. Where a firm meets the minimum standards, it will be permitted to use sensitivity models to calculate the positions referred to in those Articles and may use them for any bond which is amortised over its residual life rather than via one final repayment of the principal. Firms should read CRR Article 331 of the Market Risk: Simplified Standardised Approach (CRR) Part before applying for this permission.

3A.2 If a firm has permission under any of these Articles but ceases to be able to provide assurance with regard to a particular position which is currently within its permissions, a capital add-on may be applied and a rectification plan agreed. If a firm is unable to comply with the rectification plan within the mandated time-frame, further supervisory measures may be taken.

Minimum standards

3A.3 Firms should indicate the instruments for which net sensitivity positions are used and the currencies in which those positions are denominated. In addition, for the product scope requested firms should:

• confirm that the interest rate risk is managed on a discounted cash-flow basis; and

• briefly indicate any growth plans for the exposures.