The evolution of model risk management

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05/15/2013 by Financial services regulatory practice
The evolution of model risk management

At a glance

This A Closer Look discusses what the new model risk management guidance means holistically for banks and provides a high-level roadmap for evolving the model risk management function.

More than ten years since the OCC issued its seminal OCC 2000-16 Risk Bulletin on Model Validation, a revised and significantly expanded set of supervisory guidance was co-issued by the OCC and the Federal Reserve in April 2011. While the exact reasons for this revised guidance are not publicly known, it is likely that the Agencies were reacting to observed systemic weaknesses in bank model risk management programs under the prior guidance.

This A Closer Look discusses what the new model risk management guidance means holistically for banks and provides a high-level roadmap for evolving the model risk management function.