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Model Risk Management for Large Language Models
As financial institutions and fintechs embrace AI, Large Language Models (LLMs) are finding their way into workflows once reserved for traditional statistical models. But with opportunity comes risk. Regulators are clear: under Federal Reserve SR 11-7, any system that materially informs decisions, estimates risk, or drives business processes may constitute a “model”—and must be governed accordingly.
This white paper provides a practical framework for applying SR 11-7 to LLMs
Who Should Read This?
- Chief Risk Officers navigating AI adoption in regulated environments.
- Model Risk Management teams responsible for SR 11-7 compliance.
- Fintech and bank executives deploying generative AI solutions.
- Auditors and compliance professionals seeking clarity on AI governance expectations.
Why This Matters Now
The rapid rise of generative AI has outpaced regulatory adaptation—but regulators expect firms to apply existing standards. Institutions that proactively validate and govern LLMs will gain regulatory confidence, competitive advantage, and customer trust.