SR 11-7: Guidance on Model Risk Management
Issued April 4, 2011 jointly with the OCC (as Bulletin 2011-12), SR 11-7 set out supervisory expectations for how banks should manage the risk that quantitative models produce incorrect or misused results. It organized model risk management around three pillars: model development, implementation, and use; model validation; and governance, policies, and controls, and introduced 'effective challenge' as the guiding principle for meaningful independent review.
SR 11-7 was the Federal Reserve's foundational 2011 guidance on model risk management, covering model development, implementation, use, validation, and governance. It was formally rescinded on April 17, 2026 and replaced by SR 26-2, though SR 11-7's core principles, including effective challenge and independent validation, carried forward into the new guidance.
- Issuing body
- Board of Governors of the Federal Reserve System
- Official reference
- www.federalreserve.gov/supervisionreg/srletters/sr1107.htm
What it covers
- Defines model risk as arising from potential adverse consequences of decisions based on incorrect or misused model outputs
- Requires 'effective challenge': critical analysis by objective, informed parties who can identify a model's limitations and produce appropriate changes
- Establishes three core elements: model development/implementation/use, independent validation, and governance/policies/controls
- Introduced a de facto expectation of regular (often annual) model revalidation
- Applied jointly to institutions supervised by the Federal Reserve and the OCC
Adoption status
SR 11-7 was formally rescinded on April 17, 2026, when the Federal Reserve, OCC, and FDIC jointly issued SR 26-2 (and companion OCC Bulletin 2026-13), which supersedes and replaces both SR 11-7 and the related SR 21-8 (2021 BSA/AML model risk guidance). Despite being superseded, SR 11-7 remains the term most commonly used in the industry and in legacy MRM documentation, and its foundational concepts, effective challenge, model tiering, independent validation, are preserved in the current guidance. Institutions should update MRM programs and policy documents to reference SR 26-2 as the current standard rather than SR 11-7.
Reference only. This page explains what SR 11-7 covers; it is not a claim that Model Risk Directory or any listed vendor satisfies it. Verify alignment directly against the issuing body's own current text before relying on it.
Sources. source 1 · source 2 · source 3. Data as of 2026-07. See methodology.