Regulatory blitz weakening model risk management, say banks

Smaller banks’ modelling practices under growing scrutiny, but ability to comply is stretched

Weak link: model regulation may be undermining the validation and management process

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