SR 11-7, issued by the Federal Reserve in 2011, provides supervisory guidance on effective model risk management practices for financial institutions. It establishes expectations for identifying, assessing, controlling, and mitigating risks arising from the use of quantitative models in decision-making.
Although not a formal rule, SR 11-7 is applicable to
banks, bank holding companies, financial market utilities, and
other regulated financial institutions in the United States. It is widely followed as a de facto standard for model governance across risk, compliance, and finance functions, requiring institutions to implement comprehensive
governance frameworks that ensure proper validation, documentation, and ongoing monitoring of all quantitative models used in business operations.
