Large Bank Examination Workshop February 2026

Basel Model Risk Guidelines • Benchmarking is the examination of the performance of models relative to comparable models • Backtesting is the examination of the performance of the model based on its historical data comparing realized and predicted outcomes.  Backtesting is required for PDs, LGDs and EADs Basel language has “credit” focus, but concepts apply to market, operational, and other risk models.  Benchmarking performing loans  Benchmarking defaulted loans

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U.S. Regulatory Guidance

• OCC 2000-16

 First comprehensive guidance • Elements of sound validation policy

 Independent review  Defined responsibility  Model documentation  Ongoing validation  Audit oversight • Focus on market risk - primarily interest rate risk

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