The bank may use internal models for market risk capital only with explicit supervisory approval, which requires a conceptually sound risk management system, sufficient skilled staff, a proven track record of accuracy, regular stress testing and positions held in approved desks that pass the required tests (MAR30.1-30.2); an initial monitoring and live testing period may be imposed (MAR30.3). The bank must nominate in writing which desks are in and out of scope, may not exclude a desk because the standardised approach is cheaper, and desks not nominated at approval remain ineligible for at least one year (MAR30.4). It must run an independent risk control unit producing daily model reports and reporting to senior management, desk-level backtesting and PLA, and annual validation by a unit separate from model development (MAR30.6-30.8). Board and senior management must be actively involved (MAR30.9); stress test results must be reviewed at least monthly by senior management and feed capital assessment and limits (MAR30.11-30.12). Significant model changes need prior approval (MAR30.14), and internal audit, validation or the external auditor must review the whole measurement system at least annually (MAR30.16). Validation must cover assumptions, the HPL methodology and hypothetical portfolios (MAR30.17), alongside bank-wide and desk-level stress testing (MAR30.19-30.20).
The graph holds this control, the 0 it maps to, and the evidence behind each claim, over MCP and REST.