Large Bank Supervision Forum 2023

Key Elements of a Comprehensive Validation • Ongoing monitoring

• Establish procedures for responding to any identified problems. • Determine how changes in business impact the validity of a model. • Outcome Analysis • Establish a process to compare model outputs to corresponding actual outcomes. • Remediation steps for poor outcome performance. • Back-testing • Involves comparison of actual outcomes with model forecasts during a sample period not used in model development.

11

Board and Senior Management Responsibilities • Model Risk Appetite

• Model Use Risk Escalation

• Model Risk Management Policy and Framework

• Periodic Model Risk Reporting

• Internal Audit/Independent Review

12