UK Mid-Sized Banks IRB Roundtable

[User 438]

Dear all,

Thank you again for joining the recent Oliver Wyman UK mid-sized banks IRB Roundtable. We really appreciated the openness of the discussion and have attached the materials shared during the session for ease of reference.

A few themes stood out from the conversation:

• For the mid-sized banks, the IRB journey remains challenging not only from a modelling perspective, but also in terms of building and sustaining a clear internal business case, especially with the upcoming RWA output floor
• The value of IRB is seen beyond capital benefits alone, with greater emphasis on stronger risk management, pricing and decision-making
• Data continues to be a major constraint, particularly in relation to limited historical depth and LGD data gaps (including collateral valuation)
• There was strong interest in pooled data, benchmarking and external datasets, although it is important to ensure governance, comparability and validation through a third party engagement
• Regulatory engagement continues to be lengthy and complex, especially where expectations around submission completeness are evolving, although there appear to be some recent improvements in supervisory capacity and process
• Standardised tooling can help accelerate delivery and improve consistency, but it must remain flexible enough to reflect institution-specific portfolio characteristics and modelling choices
• The value of such tooling increases with the validation of such tooling by a third party
• Across both modelling and validation, internal ownership within each bank remains critical, particularly for senior modelling leads
• Looking ahead, many participants expect validation capacity to come under increasing pressure, especially as models become more complex and increasingly AI-enabled

As discussed during the roundtable, we will follow up with more concrete thoughts on practical next steps for data pooling. In the meantime, we would be pleased to arrange a short demo of Hercules, our credit risk modelling toolkit (you can find more details about it here)

Thank you again for the candid and insightful discussion.

Kind regards