Model governance

Institutions should ensure that the validation of CSRBB measurement methods — which should be reviewed and validated independently of their development — and the assessment of corresponding model risk are included in a formal policy process that should be reviewed and approved by the management body or its delegates. The policy should be integrated within the governance processes for model risk management and should specify:

• (a) the management roles and designate who is responsible for the development, validation, documentation, implementation and use of models; and
• (b) the model oversight responsibilities as well as policies including the development of initial and ongoing validation procedures, evaluation of results, approval, version control, exception, escalation, modification and decommission processes.