Model Risk Management and Validation Framework

This programme addresses the critical importance of model risk management in the Basel III environment, where banks rely increasingly on sophisticated models for regulatory compliance. Participants will develop comprehensive understanding of model validation principles, governance frameworks, and practical implementation challenges. The course covers validation techniques for credit, market, and operational risk models commonly used by SME banks.

The programme emphasises practical skills in model development, validation testing, and ongoing monitoring. Special attention is given to the resource constraints typically faced by SME banks and strategies for effective model risk management within these constraints.

Participants will:

• Develop comprehensive model risk management frameworks
• Master model validation techniques and testing methodologies
• Understand governance requirements for model risk management
• Implement effective model inventory and documentation systems
• Navigate regulatory expectations for model validation
• Address resource challenges specific to SME banks

• Model Risk Management Framework
  • Model risk definition and regulatory guidance
  • Three lines of defence in model risk management
  • Model lifecycle management
  • Governance and oversight requirements
• Model Validation Techniques
  • Conceptual soundness assessment
  • Process verification and implementation testing
  • Ongoing monitoring and performance assessment
  • Benchmarking and challenger model development
• Credit Risk Model Validation
  • PD, LGD, and EAD model validation
  • IFRS 9 ECL model validation
  • Stress testing model validation
  • SME-specific validation challenges
• Implementation and Governance
  • Model inventory and documentation requirements
  • Independent validation function establishment
  • Remediation and model improvement processes
  • Regulatory interaction and examination preparation