Agencies issue revised model risk management guidance

The FDIC, OCC, and Federal Reserve issued revised model risk management guidance that clarifies that model risk management should be tailored commensurately to the size, complexity, and model risk profile of a banking organization.

Details: The agencies said the revised guidance:

• Highlights sound principles for effective model risk management.

• Discusses considerations specific to vendor and other third-party products, including validation of these products.

• Does not set forth enforceable standards or prescriptive requirements, and non-compliance will not result in supervisory criticism.

More: In connection with release of the guidance, the FDIC rescinded FIL-22-2017, Adoption of Supervisory Guidance on Model Risk Management, and FIL-27-2021, Bank Secrecy Act: Agencies Address Model Risk Management for Bank Models and Systems Supporting Bank Secrecy Act/Anti-Money Laundering and Office of Foreign Assets Control Compliance.

ICBA Resources: To assist community bankers with effective model risk management, ICBA is slated to host the Model Risk Management 101 webinar next week and offers Bank Policy & Procedures: Model Risk Management Policy.