Banking Regulators Cut Model Risk Guidance: Implications for Compliance, Audit, and AML Oversight

About this episode

Tom Fox and Matt Kelly discuss the implications of new model risk management guidance from banking regulators and its impact on compliance and audit practices.

The award-winning Compliance into the Weeds is the only weekly podcast that takes a deep dive into a compliance-related topic, literally going into the weeds to explore it more fully, and looking for some hard-hitting insights on compliance. Look no further than Compliance into the Weeds! In this episode of Compliance into the Weeds, Tom Fox and Matt Kelly discuss new Federal Reserve, FDIC, and OCC model risk management guidance issued late Friday, arguing it replaces detailed, bright-line expectations with thin, principles-based language. They contrast the prior OCC guidance (109 pages) with the new 12-page document, saying it describes model risk governance abstractly but offers little direction on what banks should do, leaving decisions about materiality and oversight to management. They highlight practical consequences for bank compliance and internal audit, including reduced leverage to insist on prudent governance, potential weakening of AML model oversight under the strict-liability Bank Secrecy Act, and the risk of more arbitrary enforcement amid reduced regulatory staffing. They also note that the guidance excludes AI models, with future AI guidance promised only through…

People in this episode

Host: Tom Fox

Guest: Matt Kelly

Topics covered

• model risk management
• compliance
• audit
• AML oversight
• banking regulations

Keywords

• Federal Reserve
• FDIC
• OCC
• principles-based guidance
• Bank Secrecy Act
• AI models

Mentioned in this episode

Books & works: Compliance into the Weeds, a Communicator Award, a W3 Award

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