Model Risk Management Case Study
Business Problem – A mid-sized bank in the Southeast US, subject the FDIC (FIL-22-2017) Supervisory Guidance on Model Risk Management required the development and implementation of a model risk management framework and the creation of a formal enterprise model inventory to meet regulatory requirements.
Approach – The HnC team worked closely with the Bank’s risk management group to:
- Develop a formal Model Risk Policy and procedures
- Provide bank-wide model risk management training
- Establish a model risk ranking framework
- Assist bank groups to identity models and establish a centralised enterprise model inventory
- Recommended an appropriate method for model risk aggregation and reporting
Results
- Board approved model risk management policy and procedures
- Captured models in inventory and identified approaches to identify and capture End-user tools that do not meet the model definition
- Established model risk reporting to risk committee and board