How to Test Regulatory Assumptions Before Making a Submission

Most weak regulatory submissions fail not because the applicant lacked evidence, but because the assumptions underneath the evidence were never seriously challenged. If you want to test regulatory assumptions before making a submission, the job is to identify the beliefs your case rests on, examine whether the regulator will actually share them, and rework the submission where the answer is no. Done well, this produces a stronger filing and a more credible engagement. Done badly, or not at all, it produces surprises in the review meeting.

Key Executive Takeaways

• Every regulatory submission rests on assumptions about scope, precedent, risk appetite, and interpretation; if you cannot list yours, you cannot defend them.
• Testing assumptions means seeking disconfirmation from people who think like the regulator, not validation from people who think like you.
• The output is not just a stronger case; it is a clearer view of where you genuinely need to change position before filing.

Start by surfacing the assumptions, not the arguments

Before testing anything, write down what you are actually assuming. In most submissions the load-bearing assumptions fall into four categories:

• Interpretive assumptions: how a rule, guideline, or supervisory statement applies to your specific facts.
• Precedent assumptions: that the regulator has treated similar cases in a particular way, and will again.
• Risk assumptions: that the risks you have identified are the ones the regulator considers material.
• Evidential assumptions: that the evidence you have gathered is the evidence the regulator will find persuasive.

Senior teams routinely conflate these. A legal view on interpretation gets treated as a view on risk appetite. A precedent from three years ago gets treated as current supervisory practice. Separate them on paper. If you cannot articulate an assumption in a single sentence, it is not yet clear enough to test.

Test against the regulator's actual frame of reference

The most common mistake is testing assumptions internally, where the incentives run towards agreement. Real testing means going to people whose reflexes match the supervisor's: former regulators, specialist counsel who see live cases across the market, and where appropriate, direct pre-submission engagement with the regulator itself.

Pre-submission meetings are underused. Regulators generally welcome early engagement when the applicant arrives with a defined question, a clear position, and genuine openness to being told something they did not expect. They react poorly to meetings that feel like soft lobbying. If you use this channel, use it to test, not to persuade.

External advisers add most value when you brief them to argue the regulator's side. Ask them: where would a supervisor push back hardest? What would they consider missing? What would trigger a second information request? Treat the answers as data, not opinion.

Stress the case, not just the paperwork

Run a structured challenge session before the submission is finalised. The point is not to polish the drafting. It is to answer three questions:

1. If a supervisor took the opposite view on each key assumption, would the submission still hold?
2. Which single assumption, if wrong, would cause the greatest problem, and how would we recover?
3. Are we relying on any assumption that has not been tested against a source outside our own team?

Where an assumption fails the test, you have a real choice: strengthen the evidence, change the position, or acknowledge the uncertainty openly in the submission. The third option is often the most credible. Regulators tend to trust applicants who name their weaker points more than those who appear to have none.

What good looks like

A well-tested submission reads as if the authors already know what the tough questions will be. The reasoning is transparent, the evidence is matched to the risks the regulator actually cares about, and the areas of genuine uncertainty are flagged rather than buried. The supervisor's job becomes easier, which is itself a signal of a well-run applicant.

The decision point

Before you file, ask one question at the executive table: which of our assumptions have been tested against someone who does not work for us, and which have not? Anything in the second category is a live risk. Deal with it now, or expect to deal with it during review.

Frequently Asked Questions

How early should we start testing assumptions?

As soon as the shape of the submission is clear, not when the draft is nearly finished. Testing late tends to produce cosmetic changes rather than genuine repositioning.

Is pre-submission engagement with the regulator always advisable?

No. It is valuable when you have a specific, well-defined question and are prepared to act on the response. It is counterproductive when used to test appetite for a position you have not yet thought through.

Who should lead the challenge process internally?

Someone senior enough to override the deal or project team, and independent enough not to be invested in the outcome. Risk, internal audit, or a dedicated second-line function usually fits better than the sponsoring business.

How do we handle assumptions we cannot fully test?

Name them in the submission. Explain why they are reasonable, what evidence supports them, and what you would do if they proved wrong. Transparency on residual uncertainty is a strength, not a weakness.