Large Bank Examination Workshop February 2026

Elements of Sound Validation Policy

Defined Responsibility • The responsibility for model validation should be formally defined. Policies should specify that, before a model can enter production: a) the independent model-validation unit or external reviewer must document the model validation tests and the reasons for concluding that the model is valid, and b) internal audit must verify that no models enter production without formal approval by the validation unit.

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Model Inventory: What Counts as a Model?

• Comprehensive set of information for models implemented for use, under development for implementation, or recently retired • While each line of business may maintain its own inventory, a specific party should also be charged with maintaining a firm-wide inventory of all models, which should assist firms in evaluating its model risk in the aggregate. • Any variation of a model that warrants a separate validation should be included as a separate model and cross-referenced with other variations.

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