Model Risk Management with SAS by SAS Institute SAS

Author:SAS Institute SAS [SAS Institute SAS]
Language: eng
Format: epub, pdf
Publisher: SAS Institute
Published: 2020-06-28T16:00:00+00:00

TRIM (Targeted Review of Internal Models)

Banks often rely on internal models to estimate and report on risks such as credit risk, market risk, and operational risk. However, regulatory agencies have raised concerns about an overall lack of trust in those internal models, based on inconsistencies in the calculations used across different banks.

A targeted review of internal models, or TRIM project, is designed to help banks prepare for regulatory inspection, particularly in areas such as modeling methodologies, the risk governance framework, model risk management, data quality, and documentation of model life cycle processes. TRIM assessments are intended to reduce unwarranted variables in risk-weighted assets (RWA) and to thereby ensure the consistency, reliability, and comparability of the internal models that banks use to determine regulatory capital compliance.

TRIM projects in SAS Model Risk Management include a series of questionnaires divided into the following topics:

● Topic 0: Overarching principles. Topic 0 covers all general organizational principles and guidelines concerning model documentation, life cycle, and validation.

● Topic 1: Roll-out and PPU. Topic 1 covers the organization’s roll-out plan and permanent partial use (PPU) procedures.

● Topic 2: Internal governance, internal reporting, and organization of GRCU. Topic 2 covers the structure, responsibilities, and reporting hierarchies of the organization’s management bodies and committees.

● Topic 3: Internal audit. Topic 3 covers the organization, frequency, and findings of the organization’s internal auditing framework.

● Topic 4: Internal validation. Topic 4 covers the functions, duration and frequency, policies, depth, and breadth of the organization’s internal validation framework.

● Topic 5: Modes use. Topic 5 covers the management, rating, approval processes, allocations, functions, and overrides of an organization’s internal models.

● Topic 6: Management of model changes and extensions. Topic 6 covers the documentation and processes of an organization’s management of model change.

● Topic 7: Data-quality management. Topic 7 covers the processes, collection requirements, and infrastructure of an organization’s data-quality management.

● Topic 8: Third-party involvement. Topic 8 covers the tasks that an organization outsources to a third party as well as the types of models outsourced and internal, third-party performance control and monitoring processes.

● Topic 9: Assignment of exposures to exposure classes. Topic 9 covers the processes (general, manual, and automatic) concerning an organization’s assignment of exposures to exposure classes.

● Topic 10: Default definitions. Top 10 covers the organization’s definitions and indications of default as well as the organization’s processes to anticipate, predict, recognize, and mitigate default.

Each topic includes a Supporting Documentation table to link relevant documentation to the TRIM assessment for internal auditing purposes. A topic’s Supporting Documentation table does not accept multiple uploads of documents with the same file name. However, users might want to upload the same document multiple times to support multiple questionnaire responses.

Uploading a single document multiple times might be especially useful for long documents in which a particular section supports a response to one question and another section of the same document supports a response to a different question. A document can be uploaded multiple times so long as each upload uses a different file name.

One approach would be to name supporting documents based on the topic, question, and sub-question that it answers, as well as the section of the document that supports that answer.

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