- Expansion
- Model risk laboratory
Programme Latitude · Initiative
Model risk laboratory
The group uses 34 models: 19 in Quantitative Strategies, 11 in Information and Data and four in commercial credit scoring. Until 2027 each is validated by the team that owns it. The laboratory takes that work away from the owners and gives it to five validators who report to the Chief Risk Officer.
Validation covers the data, the assumptions, the code and the behaviour of the model when its inputs fail. A model is validated before first use, after any material change, and once a year in any case. A model that fails validation is withdrawn the same day, and the work it supported is done by hand until a validated replacement exists.
The laboratory sits in Singapore because most of the model owners sit there, and independence is easier to hold when the validator can walk to the desk and ask. It costs US$4 million of the 2027 phase. Findings go to the Risk and Valuation Committee and to the Ethics and Technology Council each quarter.
Deliverables
- Five validators in Singapore, independent of every model owner and of the trading desk.
- All 34 models in use validated within the first eighteen months after the laboratory opens.
- A model register naming the accountable person, the lawful basis for each dataset and the date of the last validation.
- Annual revalidation of every model in use, with same-day withdrawal on a failed validation.
- Findings reported to the Risk and Valuation Committee and the Ethics and Technology Council each quarter.