Model implementation timeline given the received permission in relation to a material change

In accordance with Article 3(5) of Delegated Regulation 529/2014, “Where competent authorities have provided their permission in relation to a material extension or change, institutions shall calculate the own funds requirements based on the approved extension or change from the date specified in the new permission which shall replace the prior one. The non-implementation on the date specified in the new permission of an extension or change for which permission from competent authorities has been given, shall require a new permission from competent authorities which shall be applied for without undue delay”. It is not clear what does “the date specified in the new permission” refer to.

It is evident that the IT changes underlying the material change application cannot always be rolled-out instantaneously into production environment following the approval granted by competent authorities, especially when such changes imply a fundamental model rebuild. It therefore seems reasonable that a precise implementation date must be agreed between the institution and the competent authority and specified in the permission decision. The subsequent Paragraph 6 in the same Article 3 of Delegated Regulation (EU) No 529/2014 reads that “In case of delay of the implementation of an extension or change for which permission from the competent authority has been granted, the institution shall notify the competent authority and present to the competent authority a plan for a timely implementation of the approved extension or change, which it shall apply within a period to be agreed with the competent authority”. In this context it is also critical to understand from what date the implementation shall be assessed to be in delay.