Model Risk & SR 11-7 Compliance
Model Risk Framework Components
Model Certification
Regulatory Requirement
OCC requires formal certification that model methodology is sound, assumptions are reasonable, and limitations are documented before deployment.
How Stratus Satisfies It
Stratus uses OverCaml formal verification proofs to mathematically certify ALM model correctness. Every calculation — EVE, NII, duration gap — is verified with machine-checked proofs that guarantee numerical accuracy and logical consistency.
Model Verification
Regulatory Requirement
Independent verification must confirm that model implementation matches its design specification, with automated testing of calculations and data flows.
How Stratus Satisfies It
Stratus includes a comprehensive self-test suite that runs 27+ verification tests on every ALM computation. Tests cover balance sheet identity, PV rate monotonicity, ternary roundtrip, risk monotonicity, and compliance conservative checks — all automated and auditable.
Model Validation
Regulatory Requirement
Ongoing validation through back-testing, benchmarking, sensitivity analysis, and outcome analysis to confirm model accuracy over time.
How Stratus Satisfies It
Stratus performs automated back-testing of predictions against actual outcomes. Bond buyer predictions are validated against realized purchase behavior, and ALM projections are compared to actual NII and EVE changes quarterly. Sensitivity analysis runs across 8 standard shock scenarios.
Model Governance
Regulatory Requirement
Board oversight, comprehensive model inventory, change management controls, access controls, and complete audit trail of model usage and modifications.
How Stratus Satisfies It
Stratus maintains a complete audit trail of every model run, parameter change, and verification result. The process stream provides real-time visibility into model execution. Role-based access controls and versioned model configurations ensure governance compliance.
Regulatory Guidance References
SR 11-7
Guidance on Model Risk Management
Foundational guidance establishing expectations for model development, implementation, validation, and governance across all banking activities.
SR 15-18
Federal Reserve Board Model Risk Management
Supplementary guidance reinforcing SR 11-7 with emphasis on model inventories, validation frequency, and board reporting requirements.
Letter 22-CU-07
NCUA Interest Rate Risk Supervision
Credit union-specific guidance on ALM model expectations, emphasizing NMD assumptions, stress testing adequacy, and model validation for IRR.
IRR FAQ
Interest Rate Risk — Frequently Asked Questions
Interagency FAQ clarifying regulatory expectations for IRR measurement, model assumptions, policy limits, and management reporting.