Large Bank Examination Workshop February 2026

Elements of Sound Validation Program Audit Oversight • While larger organizations may have model-validation units within internal audit departments, model validation is often outside the scope of audit responsibilities. • Nevertheless, the formal policy should clearly specify that internal audit is responsible for ensuring that the model validation and model-validation units adhere to the formal policy.

57

From OCC 11-12/FRB 11-07 • A bank's internal audit function should assess the overall effectiveness of the model risk management framework. • Internal audit should verify that acceptable policies are in place and that model owners and control groups comply with those policies. • Internal audit also has an important role in ensuring that validation work is conducted properly and that appropriate effective challenge is being carried out.

58

29

© Global Financial Markets Institute Inc.