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The federal banking agencies rescinded existing risk management model guidance late last week and replaced it with revised principles that they said better account for a financial institution’s size and complexity.
The new guidance by the Federal Reserve, FDIC and Office of the Comptroller of the Currency “clarifies that model risk management should be tailored commensurately to the size, complexity and model risk profile of a banking organization,” according to a statement. The revised guidance highlights sound principles for effective model risk management, and it discusses considerations specific to vendor and other third-party products.
The guidance does not establish enforceable standards or prescriptive requirements, and non-compliance will not result in supervisory criticism, the agencies said.