Large Bank Examination Workshop February 2026

Testing • Tests should be conducted under a range of market conditions, including scenarios outside the range of normal expectations.

• Tests should encompass the range of products and applications for which the model is intended.

• Extreme values for inputs should be evaluated to identify boundaries of model effectiveness (stress tests).

• The impact of model results on other models that use those results as inputs should be evaluated.

Source: Board of Governors of the Federal Reserve System/Office of the Comptroller of the Currency, Supervisory Guidance On Model Risk Management (SR 11-7), April 2011.

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Independent Review (Vetting) • Institutions should have an independent review (vetting) process to check that models under development are sound and fit for purpose.

Verification and Assessment Check documentation Review model owner’s model selection decision Evaluate the three components of the development process

Secondary Review Appraise conceptual soundness and model performance against criteria that reflect model purpose and product scope

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