The opinions expressed here are those of the authors. They do not necessarily reflect the views or positions of UK Finance or its members.

We recently surveyed a small sample of banks and building societies including two firms currently seeking IRB approval, to better understand barriers to adoption. The findings highlight a complex and protracted approval process. 78% of respondents reporting that IRB-model approval took more than 18 months. A third reported a wait of more than two years for regulatory feedback. Following regulatory feedback, 33% were unsure on what the next steps should be to gain approval.

Taking a closer look at these findings and broader barriers to success, three themes stand out:

• Effective regulatory engagement is crucial - firms need greater clarity over IRB approval processes.
• IRB models are resource heavy – the operational burden is particularly challenging for smaller institutions managing complex model development and validation requirements.
• Innovation is inevitable – banks are interested in using automation and advanced technologies like generative AI, but to enhance modelling capabilities, but they are conscious of the regulatory constraints. 

The EBA recognises these issues

The current Regulatory Technical Standards (RTS), counts many routine maintenance activities as material model changes, leading to a high-volume of associated applications. The EBA has explicitly acknowledged that this has limited supervisory capacity, delaying work on model remediation and creating uncertainty over implementation timelines. The revised RTS aim to reduce these issues. 

The EBA also notes that Basel 3.1 reforms introduce constraints on input and output floors, reducing the prudential impact of many IRB model refinements, negating the need to count routine maintenance changes as material.

The PRA has reached a similar conclusion

The PRA has reached a similar conclusion and subsequently launched its enhanced IRB permissions process. Applying to all new or material model change applications submitted (or resubmitted) from 1 January 2026, it aims to streamline permissions and shift the focus to firms’ readiness to adopt high-quality IRB models.

During the pre-submission period, firms can now agree a dedicated submission slot, which is supported by a documentation quality gate. This gives the PRA four weeks to review timelines and assess whether the application is complete and of sufficient quality. It’s important to note that the PRA can stop the clock for firms that don’t respond promptly to supervisory information requests.

A more responsive approach

The success of these reforms ultimately depends on firms’ ability to deliver regulator‑ready submissions upfront. This requires effective governance over model change decisions and a robust regulatory engagement strategy to support early, structured dialogue with supervisors. Ultimately, this should help in providing greater certainty and predictability, reduce supervisory bottlenecks, support rapid implementation of model improvements and allow supervisors to focus on effective oversight of IRB model risk.