Regulatory Examination

Regulatory examination refers to the process by which supervisory agencies, such as banking regulators, securities commissions, or data protection authorities, review an organization's records, systems, and controls to verify compliance with the law. For AI governance, examinations increasingly probe how firms inventory their models, validate outputs, manage third-party AI vendors, and document decisions that affect customers. Organizations that cannot produce clear evidence of these practices on short notice face findings, remediation orders, and potential enforcement actions.

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ResearchGlobal2026-11-01

Financial Model Risk Frameworks Miss Most AI Systems, Research Finds

A peer-reviewed study in the Journal of Banking Regulation finds that financial institutions' model risk management programs contain systematic gaps when applied to AI systems. The research identifies three core weaknesses. These are: model definitions that exclude many AI tools, tiering criteria that don't reflect AI-specific failure modes, and vendor governance protocols that haven't kept pace with third-party AI procurement. The authors propose targeted fixes for each gap, illustrated through market risk modeling, enterprise chatbots, and AI use-case discovery.

model risk management financial services vendor risk AI tiering model inventory regulatory examination OCC bank supervision