CP6/22 – Model risk management principles for banks
Bank of England/Prudential Regulation Authority
Consultation paper 6/22
The PRA proposes all firms to adopt five principles which it considers key in establishing an effective model risk management (MRM) framework. The principles are intended to complement existing requirements and supervisory expectations in force on MRM, and include proposals for:
- a proportionate implementation within firms and across firms, in particular for firms that would qualify as a ‘simpler-regime firm’;
- the identification and allocation of responsibility for the overall MRM framework to the most appropriate Senior Management Function (SMF) holder;
- reporting on the effectiveness of MRM for financial reporting to the audit committee; and
- identifying and managing the risks associated with the use of Artificial Intelligence (AI) technology in modelling techniques such as Machine Learning (ML) to the extent that it applies to the use of models more generally.
The full consultation paper is available at https://www.bankofengland.co.uk/prudential-regulation/publication/2022/june/model-risk-management-principles-for-banks