3.31 The PRA proposed to implement the new Basel 3.1 market risk IMA. The market risk capital requirement under the new IMA would be the sum of four components:

• an expected shortfall (ES) -based requirement;

• a default risk requirement (IMA-DRC);

• a non-modellable risk factors (NMRFs) requirement; and

• a separate capital requirement based on a 'risks not in model' (RNIM) framework.

3.32 Use of the new IMA would be subject to permission, granted at the level of a firm's individual trading desks. The new framework would also introduce minimum requirements defining the structure and eligibility of trading desks to use the IMA.

3.33 The PRA received nine responses to the proposals on the IMA. Respondents were generally supportive of the new approach, noting that the PRA had included a more proportionate treatment of CIU positions than under the Basel 3.1 standards and a more risk- sensitive approach to the recognition of NMRFs when performing back-testing on internal models. However, a number of respondents provided comments on specific elements of the proposals as described below.

Expected shortfall - calibration and profit and loss attribution test

3.34 The PRA proposed to implement the Basel 3.1 standards for the ES model in the IMA. In particular, the proposals included: