A team independent from the model developers must perform a critical review of the model’s performance and assumptions.
The SS1/23 Supervisory Statement (published in May 2023, following consultations in 2022) focuses on five core principles to ensure firms identify, assess, and mitigate risks from quantitative models: Download Ss123 2022 zip
The PRA defines a as any quantitative method or system that applies theories and assumptions to process input data into output. Principle 2: Governance A team independent from the model developers must
A designated Senior Management Function (SMF) must be accountable for the MRM framework. Models must undergo rigorous testing during development to
Models must undergo rigorous testing during development to ensure they are fit for purpose.
Firms should establish a robust board-level framework for model risk.
When models have known limitations, firms should use Post-Model Adjustments (PMAs) to account for latent risks. Implementation Timeline