UK Finance has responded to the PRA’s consultation on the use of models in stress testing. We were supportive of the PRA’s initiative which comes on the back of its observations of good practice during the annual concurrent stress testing  exercises.

We noted however that it can be difficult to quantify the model risk arising from expert judgement and emphasised that, whist boards should understand the use of models and their limitations,  the degree of granularity of that understanding should enable boards to exercise suitable challenge to model developers and owners rather than become proxy modelling subject matter experts.

Please read the full response via the link below.

UK Finance response to PRA’s CP26/17 – Model risk management principles for stress testing