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Model Validations

In addition to ensuring your models are regulatory compliant, VBC’s experienced model validation team offers valuable insights to enhance your MRM program and maximize your models as effective risk management and business decision tools.

Our validation services incorporate industry best practices, VBC’s extensive knowledge and experience, and the objectives of each Institution.  Our approach and deliverables are designed to comply with regulatory guidance related to model risk management (OCC Bulletin 2011-12/FRB SR Letter 11-7/FIL-22-2017) as well as all regulatory guidance relevant to the specific models being validated.

The VBC team is comprised of experienced industry experts from risk functions in the banking/credit union and FinTech industries, regulatory and external auditing fields, and risk model development. 

Simply put, if it’s a model, we validate it.  Some of the more common models validated include:

ALM/IRR

Our comprehensive validation examines all aspects of the modeling process including account setups and attributes, data and mapping, assumptions, reporting, and model governance. We also evaluate model results and reports to ensure accuracy and compliance with internal policies. All regulatory components such as conceptual soundness, ongoing monitoring and outcome analysis are addressed. VBC’s validation team has experience with all of the leading ALM models, including Fiserv (Sendero), ZMdesk, ZM OnlineALM, Ambit/Bancware, Empyrean, QRM, Profitstar and many others.

Liquidity Stress Models

We provide a comprehensive review of the conceptual capabilities and limitations of the model, as well as a detailed validation of all model specifications, from data and assumption inputs, cash flow generation, and contingency funding sources, to risk parameters and reporting.  We evaluate model forecast accuracy and confirm that all liquidity components are addressed and applied correctly in stressed scenarios. In the context of industry best practices, regulatory compliance, and management expectations, we perform a process and governance review to assess Institution established policies, governance structures and internal controls.

 CECL/ALLL

We perform a comprehensive review of methodologies, assumptions, calculations, reporting and governance processes. Our validation experience ranges from simplistic Excel-based models to more complex software models and models developed in languages such as SAS, Python and R. We have experience with modeling methodologies such as discounted cash flow (DCF), PD/LGD, Vintage, and WARM, as well as more sophisticated methodologies such as advanced regression and machine learning techniques including logistic regression, imbalanced learning (use of SMOTE) and analyses such as principal components analysis, clustering analysis, and factor analysis. We also place significant emphasis on qualitative adjustment factors and accompanying support analysis and documentation, if relevant.

VBC’s validation team has experience with the leading software models, including Moody’s Impairment Studio, Abrigo’s Sageworks and MainStreet Technologies (MST) and Primatics EVOLV.

Loan Stress Testing and Credit Models

VBC has experience validating various types of credit models, including CRE stress testing, credit loss models (PD/LGD), loan performance stress models, cash flow models, loan valuation models, early warning models, credit scoring models and auto-decision models. VBC has expertise in coding languages such as SAS, Python and R and our validation of these models focuses on methodologies, assumptions, calculations/code, reporting and governance processes.

BSA/AML

VBC validations are customized to meet each institution’s needs while adhering to and meeting all mandated regulatory guidelines. Our qualified CAMS specialist combines a risk-based approach with validation methodologies that ensures accuracy of data inputs as well as offering strategies to enhance model processing and output efficiency. We have experience in reviewing a wide variety of BSA/AML software solutions such as Abrigo’s BAM and BAM+, CSI’s NuMonitor, FIS’s Prime Compliance Suite, Fiserv’s Financial Crime Risk Management, GlobalVision’s Patriot Officer, Jack Henry’s Yellow Hammer, and Verafin.

Vendor Model Certification

Due to the complex nature of simulation models developed by software vendors, it is necessary for end users and subscribers to be provided with reasonable assurance that the underlying code and math is accurate and performing as expected.  As such, VBC performs model certifications for these software models.  VBC delivers to the Client a comprehensive report detailing the testing methodologies and subsequent results for all components of the certification.  VBC also provides a summary certificate outlining the results and an accuracy statement that the Client may distribute freely to their end users and other relevant parties.

Case Study: A CECL Validation That Accomplished More Than Just Identifying Issues

Ask Yourself...

What's the potential cost of not leveraging the experience, tools, and talent VBC brings to the table?