Model risk
XVA desks prioritise core tech upgrades over AI
Vendor upgrades, cloud-native rebuilds and sensitivities tooling dominate 2026 budget road maps
When AI models malfunction, address the problem not the math
Governance of artificial intelligence models should focus on actionable outcomes rather than interpretability, argues former chief regulator
Multi-factor Gaussian model calibration: swaptions and constant maturity swap options
A novel closed-form method delivers a new way to calibrate interest rate models
Double VAR breach in Q2 adds $4.1bn to JP Morgan’s market RWAs
Sixth regulatory backtesting exception in nine months lifts the multiplier above minimum for the first time since Q3 2022
Generative AI brings testing times for modellers
Flagstar’s lead model validator offers some tips for safely integrating LLMs into risk models
SEB’s market risk add-on swells 153% in Q2
Temporary adjustment more than doubles as internal model change awaits sign-off
US Fed urged to curb reliance on its own stress-test models
Original architect of DFAST says supervisors should stop putting all their eggs in one basket
Banks seek EU supervisory green light on external credit data
GCD-developed industry standard to show pooled loss data is representative of banks’ portfolios
Brain drain at OCC raises concerns about US model supervision
Quant team cull will reduce capacity to validate bank models, but that could be part of the plan
Model risk quantification for machine learning models in credit risk
This paper analyses bank-specific model risk measurement methods with a focus on implemented model risk rating solutions for MLMs and discusses challenges faced by the validation function.
Why AI-enhanced risk management is vital for open finance
In bank-fintech partnerships, AI can be both a source of operational risk and a solution to it
Citi close to launching GenAI investment tools
New tech will be used to improve investment recommendations and increase cross-selling
Amid tariff turmoil, banks warned not to fudge IFRS 9 overlays
Flip-flopping US policies challenge loan loss provisioning models; EU regulators take watching brief
Trading desks want regulators to face down the NMRF monster
Rule-makers in Australia and the European Union are open to changes to the unpopular FRTB test
DeepSeek success spurs banks to consider do-it-yourself AI
Chinese LLM resets price tag for in-house systems – and could also nudge banks towards open-source models
Top 10 op risks: cyber still top, but change management surges
AI-enhanced threats permeate this year’s top operational risks for financial firms, from infosec to geopolitics
Operational risk, capital regulation and model risk
The author proposes seven basic properties for operational risk modelling to form an operational risk management framework.
How Citi moved GenAI from firm-wide ban to internal roll-out
Bank adopted three specific inward-facing use cases with a unified framework behind them
Mitigating model risk in AI
Advancing a model risk management framework for AI/machine learning models at financial institutions
Lessons for academic research from model risk management in financial institutions
The authors suggest that model risk management practices used in financial institutions can be applied to academic research and enhance research outcomes.
EBA to address double-counting caused by new capital floor
Existing EU capital add-ons for model risk would duplicate new Basel floor on internal models