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A designated Senior Management Function (SMF) must be accountable for the MRM framework.

The SS1/23 Supervisory Statement (published in May 2023, following consultations in 2022) focuses on five core principles to ensure firms identify, assess, and mitigate risks from quantitative models:

The PRA defines a as any quantitative method or system that applies theories and assumptions to process input data into output. Principle 2: Governance Download Ss123 2022 zip

When models have known limitations, firms should use Post-Model Adjustments (PMAs) to account for latent risks. Implementation Timeline

Firms should establish a robust board-level framework for model risk. A designated Senior Management Function (SMF) must be

While the statement was finalized in 2023, the foundation was laid in through the CP6/22 Consultation Paper. Most firms were expected to have implemented these principles by May 2024. SS1/23 – Model risk management principles for banks

Models must undergo rigorous testing during development to ensure they are fit for purpose. SS1/23 – Model risk management principles for banks

A team independent from the model developers must perform a critical review of the model’s performance and assumptions.