SR Letter 11-7 Supervisory Guidance on Model Risk Management

SR Letter 11-7 has become the premier standard for model risk management, with its principles being adopted not only by banks, but also by virtually all U.S. financial institutions.

It addresses model construction, validation and usage. It goes on to review model management responsibilities including oversight, governance and policies.
The guidance also cites the need for uniformity of model management and policies across businesses within an organization. This training program will detail why SR Letter 11-7 has become the gold standard for model risk management, with its principle being adopted not only by banks but also virtually all U.S. financial institutions.

Financial institutions rely on models and quantitative analysis to perform key activities such as investment valuations, risk management and liquidity and capital management. A sound management of the risks inherent in the use of mathematical models is imperative to reduce the risk of reliance on flawed or misapplied models. SR Letter 11-7, issued jointly by the Federal Reserve and OCC, provides comprehensive guidance for banks on effective model risk management.

Failure to validate models at the company level increases the risk of regulatory criticism, fines, and penalties. 

This webinar will offer attendees an understanding of the background behind SR Letter 11-7. It will further discuss the purpose and scope behind the supervisory guidance on model risk management.

• Understanding SR11-7 guidance
• Applying the guidance contained in SR 11-7
• Review of current models in the context of SR 11-7
• Improve the effective use of risk management models
• Evaluate policies and procedures that govern the development, validation and use of risk management models
• Understanding model validation
• Ensure that there is appropriate board of director and executive/senior management oversight of the development and use of risk management models

• Background and objective of SDR 11-7
• Summary review of types of risk management models
• Defining model risk
• Purpose and scope of the guidance
• Model Risk Management
      o    Development
      o    Implementation
      o    Use
• Model Validation
• Governance
      o    Management oversight
      o    Policies and Control
      o    Roles and Responsibilities
• Actual case studies reflecting model risk experiences

• Model Developers, Model Evaluators
• Business Managers Utilizing Models
• Financial Managers Utilizing Models
• Risk Managers, Risk officers
• Internal and external auditors
• Regulators
• Board of Director Members
• General (legal) counsel
• Executive and Senior Managers

           o    CFOs
           o    COOs
           o    CROs
           o    CIOs
           o    CPAs
           o    CBAs
           o    CFEs

• Information technology managers
• Asset managers
• Broker/dealers
• Supervisors
• Financial officers and controllers
• Regulators who supervise or examine banks or financial institutions