OCC Model Risk Management: 2023 Updates to SR 11-7 Implementation
The OCC's updated expectations for model risk management emphasize enhanced challenge mechanisms, independent validation processes, and robust governance frameworks for banking organizations of all sizes.
Executive Summary
The Office of the Comptroller of the Currency continues to refine model risk management expectations under SR 11-7, with particular emphasis on credible challenge processes and independent validation capabilities. Recent supervisory guidance clarifies requirements for model governance, validation standards, and ongoing monitoring across credit, market, and operational risk models.
Key Regulatory Updates
- OCC Model Risk Management Handbook - Comprehensive guidance on MRM implementation
- OCC Bulletin 2021-3 - Computer-Aided Decision Tools and artificial intelligence risk management
- Comptroller's Handbook on Model Risk Management - Examination procedures and expectations
Core Challenge Requirements
Banks must implement credible challenge mechanisms throughout the model lifecycle, from development through ongoing monitoring. Challenge functions must be independent, technically competent, and empowered to influence model-related decisions.
Implementation Priorities
- Independent model validation units with appropriate authority and resources
- Model governance frameworks with clear challenge escalation procedures
- Comprehensive model inventories and risk tiering systems
- Regular validation schedules aligned to model risk and regulatory expectations