The UK's Model Risk Management Principles For Banks

Against a background of increasing reliance on models and scenario analysis to assess future risks, the UK's bank regulator, the Prudential Regulation Authority ("PRA"), has published a supervisory statement on "Model risk management principles for banks" ("SS1/23"). SS1/23 applies to UK banks, building societies and larger PRA-designated investment firms that use internal models to arrive at regulatory capital requirements for credit, market or counterparty credit risk. The PRA considers that other firms, including third-country firms operating in the UK through a branch, may find the contents "useful" and invites their participation.

SS1/23 sets out the five key principles that underpin a robust model risk management ("MRM") framework and associated policies, procedures and practices, including at board level: