FDIC Adopts OCC/FRB Guidance on Model Risk Management

The FDIC adopted guidance on Model Risk Management issued by the Board of Governors of the Federal Reserve System and the Office of the Comptroller of the Currency (see FRB/OCC Guidance). The FDIC's version of the guidance incorporates certain revisions that are intended to make it applicable to FDIC-supervised institutions.

The guidance (i) details supervisory expectations for managing model risk, and for validating both institution-developed and third-party models, and (ii) outlines an effective framework for risk management with respect to the models. The FDIC noted that the guidance is unlikely to apply to institutions with less than $1 billion in assets.