Regulatory blitz weakening model risk management, say banks
Smaller banks’ modelling practices under growing scrutiny, but ability to comply is stretched
A push by regulators on both sides of the Atlantic to formalise model risk management processes may be causing more harm than good, say dealers.
“There is a tremendous focus on form and not much focus on substance, meaning that people are generating a lot of reports and a lot of paperwork in terms of documentation – but the quality of the risk management processes associated with models has declined over time. I have made this point to the regulators in the US and also in the UK,” says the head
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