Dear CFO, CAO, or other Responsible Banker,

Hi, I'm Val the Validator!  It is a great pleasure to meet you.  Welcome to my description of the general model validation process. Please note, I have drawn the illustration above to show the rough step-by-step that I follow when reviewing a model. 

As set forth by the Federal Reserve, the model validation process serves as a second-line-of-defense that is distinct from model development and audit.  The foundational regulatory guidance is FRB SR 11-7 which requires model validators to be independent from those who develop or use the models and to have substantial, up-to-date technical qualifications and experience to assess model design, data quality validation methods, and risk implications. This means a Validator must have a very strong background in statistics, econometrics, mathematics, and finance, plus hands-on experience with Federal model validation standards.

See FRB SR 11-7, OCC 2011-12, and FDIC FIL 22-2017 here:

https://www.federalreserve.gov/supervisionreg/srletters/sr1107.htm

https://www.federalreserve.gov/supervisionreg/srletters/sr1107a1.pdf

https://occ.gov/news-issuances/bulletins/2011/bulletin-2011-12.html

https://www.fdic.gov/news/financial-institution-letters/2017/fil17022.html

Back to what we do at MWC.  We have certain pledges for quality and integrity.  First, MWC hires only those Validators who are able to do the entire scope of work.  Second, we pledge to never piecemeal the technical aspects of any validation to personnel who are not involved in writing the final deliverable.  Third, we don’t send your model to any overseas workers, because we have our own US-based team of fully qualified Validators who code, test, and write reports.  Fourth, MWC verifies the educational credentials of all Validators and Peer Reviewers and makes diplomas available during the proposal phase (we have a zero-tolerance policy concerning the advertised academic credentials of our validation professionals).

Feel free to message Mark or Zak with any of your questions. Wishing you many happy validations and smooth mitigations!

Sincerely,

Val