Large Bank Examination Workshop February 2026

Interagency Guidance on Model Risk Management - 2011 • Most comprehensive guidance for banks on effective model risk management. • Rigorous model validation plays a critical role in model risk management; however, sound development, implementation, and use of models are also vital. • Encompasses governance and control mechanisms such as board and management oversight, policies and procedures, controls and compliance, and an appropriate incentive and organizational structure.

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Federal MRM Regulatory Guidance

• Federal Reserve SR 11-7 (2011) - Defines model risk as the potential for adverse consequences from flawed or misused models. Requires banks to establish robust model risk management frameworks, including governance, validation, and ongoing monitoring. • OCC Comptroller’s Handbook: Model Risk Management (2021 update) - Provides detailed examination procedures for national banks and federal savings associations. Aligns with SR 11-7 principles, emphasizing independent validation, documentation, and board oversight. • FDIC Supervisory Guidance (FIL-22-2017, updated 2024) - Applies SR 11-7 principles to FDIC-supervised institutions. Highlights model risk in areas like capital adequacy, stress testing, and credit risk.

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