Regulatory Compliance Challenges in Model Risk Management

This technical report discusses the evolving challenges of regulatory compliance in model risk management (MRM), particularly in the context of increasing regulatory demands and the integration of artificial intelligence (AI). It outlines the inefficiencies of manual documentation processes and the need for end-to-end automation to enhance compliance and operational efficiency. The report presents findings from a survey conducted with financial institutions (FIs) across the United States, United Kingdom, and Brazil, indicating a significant rise in regulatory requirements and the necessity for comprehensive automation solutions. Key statistics reveal that a large percentage of FIs struggle with maintaining compliance due to resource-intensive documentation processes and the rapid pace of regulatory changes. The report emphasizes the importance of consistent model documentation to mitigate risks and enhance transparency, as well as the growing recognition among FIs of the need for robust regulatory technology (RegTech) solutions to navigate these complexities effectively.