21.1 Firms should specify internal policies for changes of models and estimates of risk parameters used within a rating system. Such policies should provide that changes to models should be made as a result of at least the following:

(a) regular review of estimates;

(b) independent validation;

(c) changes in the legal environment;

(d) internal audit review; and

(e) PRA review.

21.2 Where material deficiencies are identified as a result of the reviews referred to in paragraph 21.1, firms should take appropriate action depending on the severity of the deficiency in accordance with Article 146 of the Credit Risk: Internal Ratings Based Approach (CRR) Part.

21.3 For the purpose of regular reviews of estimates, a firm should have a framework in place which includes at least the following elements:

(a) a minimum scope and frequency of analyses to be performed, including predefined metrics chosen by the firm to test data representativeness, model performance, its predictive power, and stability;

(b) predefined standards, including predefined thresholds and significance levels for the relevant metrics; and