Supervisory Guidance on Model Risk Management¶
Board of Governors of the Federal Reserve System, & Office of the Comptroller of the Currency. (2011). Supervisory Guidance on Model Risk Management.
Cited by¶
5 citations across 5 artifacts.
Each citation links to the sentence it supports in the citing article.
Primes¶
- Out Of Distribution Detection
- Statistics and survey research: explicit refusal to generalise beyond the sampled population or outside the convex hull of training data. Finance: credit models that decline to score applicants from populations they were not trained on, rather than producing scores that look like predictions.
This sourceIdentifies applying a model outside its intended scope or population as a primary source of model risk and requires institutions to understand model limitations and assumptions — the model-risk-management basis for credit/risk models declining to score applicants outside their development population rather than emitting out-of-scope scores.
- Statistics and survey research: explicit refusal to generalise beyond the sampled population or outside the convex hull of training data. Finance: credit models that decline to score applicants from populations they were not trained on, rather than producing scores that look like predictions.
Mechanisms¶
- Independent Assumption-Challenge Gate
- Its strength is that it breaks the optimism of self-assessment and gives "no" an enforceable form — the discipline banking supervisors call effective challenge: critical review by parties who are competent, independent, and have the influence to compel change.
This sourceDefines effective challenge as critical analysis by objective, informed parties whose competence and influence can secure corrective action.
- Its strength is that it breaks the optimism of self-assessment and gives "no" an enforceable form — the discipline banking supervisors call effective challenge: critical review by parties who are competent, independent, and have the influence to compel change.
- Model-Failure Red Team
- This is the "effective challenge" that model-risk governance calls for.
This sourceDefines effective challenge as objective, informed critical analysis that identifies model assumptions and limitations and produces appropriate changes.
- This is the "effective challenge" that model-risk governance calls for.
- Model Registry
- Its strength is that it turns a sprawling, silently-changing population of models into something traceable, accountable, and reversible — the substrate that model-risk governance (in banking, the discipline codified by supervisory guidance such as the Federal Reserve's SR 11-7
This sourceRequires a comprehensive, responsible firm-wide model inventory that supports traceability, accountability, and aggregate model-risk management.
- Its strength is that it turns a sprawling, silently-changing population of models into something traceable, accountable, and reversible — the substrate that model-risk governance (in banking, the discipline codified by supervisory guidance such as the Federal Reserve's SR 11-7
- Risk Score Threshold Recalibration
- Crucially, the middle manual-review band is preserved and its width tuned, so underwriters still see borderline cases — and an override channel lets them reverse an edge decision
This sourceRecognizes expert-judgment overrides in which model users ignore, alter, or reverse a model output.
- Crucially, the middle manual-review band is preserved and its width tuned, so underwriters still see borderline cases — and an override channel lets them reverse an edge decision
Verification¶
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Links previously used in the corpus¶
Before the registry existed this work was also linked 2 other ways.
- https://www.federalreserve.gov/boarddocs/srletters/2011/sr1107a1.pdf ×3
- https://www.federalreserve.gov/boarddocs/srletters/2011/sr1107.htm ×1
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