European regulators lag on model validation, top quant claims

Supervisors in mainland Europe are 'all over the map' on model validation, says Morgan Stanley's Jon Hill

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Model validators should not answer certain types of questions from developers

European regulators are lagging their US and UK counterparts in ensuring that quantitative models are subject to independent validation, a senior quant has claimed.

US regulators require banks to independently validate all capital models – and it is generally considered good practice to do this for all models used for risk management, finance and accounting purposes. 

Models should be validated by a team that is completely independent from the model developers, but the lines of separation can be

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