General criteriaGeneral criteria

General criteria

An ADI using an internal model for regulatory capital purposes must:

1. have a market risk management strategy that is conceptually sound and implemented with integrity;

2. have sufficient numbers of staff skilled in the use of sophisticated models in the trading, risk control, audit and back-office areas;

3. have a proven track record of reasonable accuracy in measuring risk; and

4. regularly conduct stress tests.

   An ADI must also be able to participate in testing exercises to provide any additional information required to satisfy APRA of the adequacy of the internal model (both prior to model approval and subsequently, if APRA wishes to review the internal model).