Large Bank Examination Workshop February 2026

Exercise #3: Review Redacted Model Validation Report

Evaluate excerpts from Sample Bank’s model validation report. Respond to each of the questions below for the major elements of a sound validation program.

1. Data and Assumptions a. Does the Validation Report contain an analysis of the quality and integrity of data? If so, cite page ranges in the report addressing this.

b. Does the validation report indicate compliance with regulatory guidance that model assumptions should be calibrated specifically to factors related to the bank rather than relying on national averages or estimates? Explain.

c. Were there any opportunities for improvement noted in the development of assumptions for decay rates? If so, summarize.

2. Model Theory and Model Code and Mathematics

a. What is the primary resource that is referenced to gain assurance around the appropriateness of the model theory, code and mathematics?

b. What other analysis could be conducted beyond the scope of this validation report to gain assurance that the theory, code and mathematics of the model are acceptable?

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