Model Validation: 3 Core Elements for SR 11-7 Compliance

I've had the good fortune of working with several banks over the last few years guiding them in the development of machine learning models to serve their customers better and enhance risk management. Armed with information on what to look for while conducting a reliability assessment of a given model, banks can practice due diligence and be regulatory compliant. So what does an effective and comprehensive validation framework look like? It entails review of documentation and empirical evidence supporting the methods used and variables selected for the model. A lack of documentation is a red flag. It also includes data sources and as well as the business case.