Featured Product

    OCC Issues Booklet on Management of Modeling Risks by Banks

    August 18, 2021

    The Office of the Comptroller of the Currency (OCC) issued the new Model Risk Management booklet of the Comptroller's Handbook for banks. The booklet can be used by OCC examiners in the supervision of national banks, federal savings associations, and federal branches and agencies of foreign banking organizations. The booklet presents the concepts, general principles, and sound practices for model risk management and aligns with the principles laid out in supervisory guidance on Model Risk Management. It also provides information needed to plan and coordinate examinations on model risk management, identify deficient practices, and conduct appropriate follow-up.

    In this booklet, OCC has defined eight categories of model risks for bank supervision purposes: credit, interest rate, liquidity, price, operational, compliance, strategic, and reputation. The use of models invariably presents model risk, which is the potential for adverse consequences
    from decisions based on incorrect or misused model outputs and reports. Model risk can lead to financial loss, poor business and strategic decision making, or damage to a bank’s reputation. The risks associated with model use can occur at any point during a model’s development,
    implementation, use, and validation. As per the supervisory guidance on model risk management, banks should identify the sources of risk and assess the magnitude of these risks. The booklet also addresses how banks should manage third-party risks in model development. OCC notes that third-party risk management weaknesses related to a bank’s use of third parties providing models or related products and services could increase operational risk, particularly when management does not fully understand a third-party model’s capabilities, applicability, and limitations. The booklet also covers weaknesses in internal controls and emphasizes that security weaknesses, including poorly constructed application program interfaces (API) and weaknesses in the controls for the access, transmission, and storage of sensitive customer information, could expose a bank to increased operational risk.

     

    Related Links

    Keywords: Americas, US, Banking, Comptroller Handbook, Community Banks, Third-Party Risk, Operational Risk, Governance, Internal Controls, API, Regtech, Guidance, Model Risk, Artificial Intelligence, OCC

    Related Articles
    News

    OSFI Issues Results of Pilot on Climate Risk Scenario Analysis

    The Office of the Superintendent of Financial Institutions (OSFI) published an update on the discussion paper that intended to engage federally regulated financial institutions and other interested stakeholders in a dialog with OSFI, to proactively enhance and align assurance expectations over key regulatory returns.

    January 20, 2022 WebPage Regulatory News
    News

    EC Issues Regulation on Adjustments to K-Factor Coefficients Under IFR

    The European Commission (EC) published a report summarizing responses to the targeted consultation on the supervisory convergence and the single rulebook in the European Union (EU).

    January 20, 2022 WebPage Regulatory News
    News

    ECB Issues Opinions on Green Bonds Standard and CRR Proposals

    The European Central Bank (ECB) published its opinion on a proposal for a regulation on European green bonds, following a request from the European Parliament.

    January 19, 2022 WebPage Regulatory News
    News

    ESRB Explores Policy Response to Risks Arising from Digitalization

    The Advisory Scientific Committee (ASC) of the European Systemic Risk Board (ESRB) published a report that explores the expected impact of digitalization on provision of financial and banking services, and proposes policy measures to address the risks stemming from digitalization.

    January 18, 2022 WebPage Regulatory News
    News

    HKMA Consults on FIRO Code, Revises Policy on Foreign Exchange Risk

    The Hong Kong Monetary Authority (HKMA) is consulting on the draft Financial Institutions (Resolution) Ordinance (Cap. 628), or FIRO, Code of Practice chapter on liquidity and funding in resolution, until March 14, 2022.

    January 18, 2022 WebPage Regulatory News
    News

    FI Publishes Multiple Regulatory and Reporting Updates

    The Swedish Financial Supervisory Authority (FI) announced that the capital adequacy reporting as at December 31, 2021 must be done by February 11, 2022.

    January 17, 2022 WebPage Regulatory News
    News

    EU Authorities Address COVID-19 Reporting, MCD, and PSD2 Issues

    The European Banking Authority (EBA) announced that the guidelines on the reporting and disclosure of exposures subject to measures COVID-relief measures shall continue to apply until further notice.

    January 17, 2022 WebPage Regulatory News
    News

    BSP Tackles Aspects of Lending and Islamic, Open & Sustainable Finance

    The Central Bank of the Philippines (BSP) issued communications covering developments related to online lending platforms, open finance framework and roadmap, and on the expected regulations in the area sustainable finance.

    January 16, 2022 WebPage Regulatory News
    News

    US Agencies Issue Regulatory Updates, FDIC Launches Tech Sprint

    The Board of Governors of the Federal Reserve System (FED) published the final rule that amends Regulation I to reduce the quarterly reporting burden for member banks by automating the application process for adjusting their subscriptions to the Federal Reserve Bank capital stock, except in the context of mergers.

    January 13, 2022 WebPage Regulatory News
    News

    EBA Issues Guide on Bank Resolvability, Consults on Transferability

    The European Banking Authority (EBA) published its assessment of risks through the quarterly Risk Dashboard and the results of the Autumn edition of the Risk Assessment Questionnaire (RAQ).

    January 13, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 7903