The Agency for the Regulation and Development of the Financial Market has published a report on the results of the first supervisory assessment of the model risk management system at second-tier banks.

The assessment represented the next step in the development of risk-based supervision, along with the SREP, the Asset Quality Review (AQR) and supervisory stress testing. The assessment was conducted to determine the maturity level of model risk management systems and included an analysis of approaches within the three lines of defense, as well as independent validation of individual models.

The report outlines the approaches and principles used in the assessment, presents the results of the analysis of the current state of model risk management systems at selected banks, and sets forth the Agency’s supervisory expectations regarding the establishment of an effective model risk management system.

The assessment found that, at the banks covered, the model risk management systems are at a formative stage and require further development in the areas of corporate governance, independent oversight and model validation processes.

The Agency’s supervisory expectations take into account the growing use of quantitative models in banking activities and cover both traditional models and those based on machine learning and artificial intelligence methods. These expectations are formulated in accordance with leading international standards and best practices.

The publication of the report aims to enhance the transparency of the Agency’s supervisory approaches in the area of model risk, foster dialogue with market participants, and establish common guidelines for the banking sector.

External Communications Office

press@finreg.kz

Source : https://www.gov.kz/memleket/entities/ardfm/press/news/details/1239600?lang=ru