Large Bank Examination Workshop February 2026

Key Components of a MRM Policy

4. Model validation and testing:

• Validation scope: Defines the processes for independently reviewing a model's accuracy, reliability, and suitability for its intended use. • Validation techniques: Includes requirements for various testing techniques, such as back-testing, benchmarking against alternative models, and sensitivity analysis. • Assessing limitations: Requires the assessment of a model's limitations, assumptions, and potential impact.

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Key Components of a MRM Policy

5. Monitoring and reporting:

• Ongoing monitoring: Establishes a process for continuously monitoring model performance to detect any drift or changes that could affect its accuracy. • Performance triggers: Sets triggers for when a model requires re-evaluation or validation. • Reporting: Defines the requirements for reporting on model performance and validation results to appropriate stakeholders, including senior management and the board.

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