Key facts
- A Risk.net study reveals that most US banks expect a reduction in model risk supervisory scrutiny.
- In contrast, European banks anticipate an increase in regulatory oversight for model risk.
- The divergence in regulatory expectations poses challenges for global financial institutions.
- The study surveyed banks regarding their frameworks for model risk management.
A recent study by Risk.net highlights a growing divergence in regulatory expectations for model risk management between the United States and Europe. According to the findings, a majority of banks operating in the US anticipate a relaxation of supervisory scrutiny concerning model risk. This outlook contrasts sharply with their European counterparts, who expect a tightening of regulations in this area. This disparity in regulatory approaches presents a significant challenge for global financial institutions that must navigate differing compliance landscapes. The study, which benchmarks bank model risk management practices, suggests that the first rewrite of US model risk supervisory guidance in 15 years has elicited a mixed response from the banks it governs.