Large Bank Examination Workshop February 2026

Best Practices for Developing Assumptions • Organizations should strive to use assumptions that reflect the institution’s profile and activities and generally avoid reliance on industry estimates or “default” assumptions.  e.g. national prepayment speed averages • Industry averages provide an approximation but are not a suitable estimate in every case. • An organization can contract with an outside vendor to assist with this process if necessary.

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Model Processing • Model processing consists of the computer code and the theoretical models used. • The choice of theory is at least partly a matter of art rather than science: judgment comes into play in deciding what simplifications are acceptable. • The validation for the processing component of models should ensure that mathematics and computer code are error free.

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