The federal banking agencies’ revised model risk management guidance in SR 26-2 reflects a more explicitly risk-based approach to model governance, validation, and monitoring. Although the guidance is expected to be most relevant for organizations with more than $30 billion in assets, SR 26-2 is better understood as principles-based rather than purely scope-based. In practice, supervisory expectations remain tied to the materiality of model use, the complexity of the institution and its models, and the significance of the underlying use case — not simply to asset size alone. As a result, the guidance also signals important expectations for smaller banks that rely on models for credit, liquidity, capital, allowance, forecasting, and other high-impact decisions.
