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Governance

Model governance

The policies, roles, committee structures, and controls an institution puts in place to oversee its model risk management program: who owns the inventory, who approves new models, how validation findings are escalated, and how the board and senior management maintain oversight. One of SR 11-7/SR 26-2's three foundational pillars, alongside model development/use and independent validation.

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How the term is used in model risk management

The policies, roles, committee structures, and controls an institution puts in place to oversee its model risk management program: who owns the inventory, who approves new models, how validation findings are escalated, and how the board and senior management maintain oversight. One of SR 11-7/SR 26-2's three foundational pillars, alongside model development/use and independent validation. The exact implementation varies by institution, model type, risk rating, and governing framework. Use the linked regulatory pages and buyer guides below for scope-specific requirements.

Related glossary terms

Model risk managementThree lines of defenseModel inventory

Guides and frameworks that use this term

GuideModel Risk Management FrameworkA model risk management framework is the documented set of policies, roles, and processes an institution uses to identify, tier, govern, and validate its models. Under SR 26-2, a sound framework covers model development and use, independent validation, and governance and controls, scaled to the institution's size and model risk profile rather than applied uniformly.GuideBest model risk management softwareThe best MRM software is the platform that fits your model inventory, governance workflow, evidence requirements, validation process, integrations, security controls, and operating model. This guide summarizes the directory's software vendors alphabetically. It does not award a winner without a shared test environment, verified pricing, and comparable customer evidence.GuideModel Risk ManagementModel risk management (MRM) is the discipline of identifying, measuring, and controlling the risk that a bank's quantitative models produce incorrect or misused results. An MRM advisory firm helps build or run that discipline: model inventory, tiering, governance, and independent validation, rooted in Federal Reserve SR 26-2 (formerly SR 11-7) and OCC guidance.FrameworkBCBS Core PrinciplesThe Basel Committee does not publish a single, general-purpose MRM standard equivalent to SR 26-2. Its Core Principles, consolidated Basel Framework, and model-specific capital rules establish supervisory expectations for governance, risk measurement, validation, controls, and independent review that national regulators apply to banks using internal models.FrameworkECB GuideThe ECB Guide to Internal Models sets out European banking supervision's expectations for how significant institutions use internal models to calculate regulatory capital for credit, market, and counterparty credit risk. Developed through the 2016-2021 Targeted Review of Internal Models (TRIM) project, it was most recently revised in July 2025 to reflect CRR3 and updated machine-learning expectations.FrameworkEIOPA Internal Model GuidelinesEIOPA's Guidelines on the use of internal models support consistent Solvency II supervision of insurers using full or partial internal models. They address application and approval, model changes, the use test, governance, documentation, data, validation, expert judgment, external models and data, group models, and supervisory communication.