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June 07, 2017

FDIC is adopting the Supervisory Guidance on Model Risk Management, with technical conforming changes, thereby making the guidance applicable to certain FDIC-supervised institutions. The guidance was previously issued by the FED (SR 11-7) and the OCC (OCC Bulletin 2011-12). FDIC is adopting this guidance to facilitate consistent model risk-management expectations across the banking agencies and industry. The guidance addresses supervisory expectations for model risk management, which includes model development, implementation, and use; model validation; and governance, policies, and controls.

FDIC is adopting the guidance with the technical conforming changes, including revised definition of "banks" to reflect the FDIC's supervisory authority and its expectations that the Supervisory Guidance generally pertains to FDIC-supervised institutions with USD 1 billion or more in total assets and including revised references to the existing guidance to reflect the FDIC guidance. It is not expected that this guidance will pertain to the FDIC-supervised institutions with under USD 1 billion in total assets, unless the institution's model use is significant, complex, or poses elevated risks to the institution. Some FDIC-supervised institutions have increased their reliance on models for various functions, such as credit management, operational risk, valuation, and stress testing.

 

Related Links

Financial Institutional Letter (PDF)

Supervisory Guidance on Model Risk Management (PDF)

Keywords: Americas, US, FDIC, Model Risk Management, Banking, Supervisory Guidance

 


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