Large Bank Examination Workshop February 2026

Validation Best Practices • The model validation process should optimally begin during the model implementation process in order to ensure that any model risks are identified  While model is in “beta” testing • Additionally, any changes to a model’s design or enhancements should be considered in light of existing assumptions and limitations around use and any updates that may need to occur. • Validation conducted on an ongoing basis at appropriate periodic intervals

55

Evaluation of Conceptual Soundness

Ongoing Monitoring Process verification Benchmarking against alternative internal or external data or models

Effective Validation

Outcomes Analysis Comparison of model outputs to corresponding actual outcomes

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.

56

28

© Global Financial Markets Institute Inc.