Large Bank Examination Workshop February 2026

Federal Reserve SR 11-7 (2011) Provides comprehensive guidance on model risk management for banks. It emphasizes that models are inherently imperfect, so institutions must have strong governance, validation, and controls to manage risks from their use. • Definition of a Model A model is any quantitative method, system, or approach that applies statistical, economic, financial, or mathematical techniques to process input data into quantitative estimates. • Purpose of the Guidance Issued jointly by the Federal Reserve and the Office of the Comptroller of the Currency (OCC) , SR 11-7 sets supervisory expectations for how banks should manage risks associated with models used in decision-making.

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OCC MRM Update (10/6/25) • Community banks have the flexibility to tailor their model risk management practices, including the appropriate frequency and nature of validation activities, commensurate with the bank's risk exposures, its business activities, and the complexity and extent of its model use. • The OCC's guidance on model risk management does not, and should not be interpreted to, require community banks to perform annual model validation. • The OCC will not provide negative supervisory feedback to a bank solely for the frequency or scope of the model validation that the bank reasonably determined to perform based on the bank's risk exposures, its business activities, and the complexity and extent of its model use.

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