Criteria for granting approval of permission to use the IRB approach

2.1 As set out in Article 143(1) of the Credit Risk: Internal Ratings Based Approach (CRR) Part, firms applying for permission to use the IRB approach are required to demonstrate that they materially comply with the requirements of the Credit Risk: Internal Ratings Based Approach (CRR) Part. The PRA will therefore only grant approval to use the IRB approach where this condition is met.

Assessment of non-compliance and remediation plans

2.2 For the purpose of assessing whether non-compliance is immaterial in accordance with Articles 143(1)(a), 143(2B), 143(3)(b), 146(1)(b) and 149(2A) of the Credit Risk: Internal Ratings Based Approach (CRR) Part, the PRA expects that non-compliance should only be considered immaterial if it results in a minimal impact on the quantitative and qualitative aspects of the firm's IRB approach.

2.3 In accordance with Article 146(1) of the Credit Risk: Internal Ratings Based Approach (CRR) Part, firms are required to submit a plan for addressing non-compliance in a timely way to the PRA if they are materially non-compliant with the requirements of the Credit Risk: Internal Ratings Based Approach (CRR) Part. The PRA also expects firms to present a plan to the PRA for addressing non-compliance in a timely way such that the effect of non- compliance would become immaterial if they are materially non-compliant with any relevant PRA SSs relating to IRB (including, but not limited to, this SS).