ALM Model Validation

MountainView's service establishes the high levels of business and regulatory confidence needed to fully use an ALM model as a performance management and risk analysis tool.

Our model risk assessments provide industry-leading solutions for verifying and validating that an ALM model meets business best practice requirements and regulatory guidance, such as FFIEC 2010-1A IRR and its associated FAQs, NCUA 12 CFR Part 741 and 12-CU-11, and OCC Bulletin 2011-12/FRB SR Letter 11-7. The assessments provide the high confidence level that only a truly independent review, produced by experienced ALM model users and financial management experts, can bring.

Benefits of MountainView's Validation

With our service, your institution is empowered to:

  • Meet current regulatory mandates relating to verifying and validating an ALM model
  • Precisely manage total balance sheet risk and return for higher current performance
  • Accurately measure interest rate risk (IRR) with improved accuracy
  • Better understand the behavior of all assets and liabilities, including those with options
  • Enhance and optimize ALM processes, IRR limits and ALCO policies
  • Benefit from the insights of an experienced and seasoned ALM model assessment team
  • Understand the workings of your ALM model better and more fully utilize it in ALCO

Comprehensive ALM Model Validation

Our comprehensive service examines every facet of your institution's ALM model and supporting model governance. This service is the most robust solution possible for meeting business and regulatory needs and addresses all aspects of the Supervisory Guidance on Model Risk Management (SR 11-7). We provide you with a comprehensive review of the conceptual capabilities and limitations of the model, as well as a detailed technical validation of all model specifications from data inputs, category attributes and assumptions inputs to risk reporting. We effectively challenge model forecast accuracy through multiple model tests and outcomes analysis. We fully assess the adequacy of your model governance solution including ALCO/ALM policies, IRR limits, model control environment, ongoing model monitoring plans and model administration actions.

MountainView's comprehensive ALM model validation includes a formal model ranking relative to peer model implementations, with detailed model findings ranked in order of importance or model risk materiality. Based on our years of validation expertise, we also provide clients additional insight with advanced industry practices to offer added perspective and guidance.

Technical ALM Model Validation

MountainView's technical ALM model validation service focuses on providing a complete process verification validating all technical aspects of your ALM model. This includes evaluation of the basic data inputs and all category set-up attributes for each chart of account category. We fully review all assumption inputs, including contractual and behavioral for both net interest income and market value assessments. We also review and confirm all model outputs for risk reporting. As part of the technical validation, we confirm model accuracy through multiple diagnostic tests and assessments.

In our reports, we rank the quality of technical specifications and forecast accuracy based on the assessment of model quality given current business and compliance needs and relative to similar recently assessed peer models. We then prioritize the model findings by level of importance or model risk materiality and provide you with additional insight into valuable industry best practices.

ALM Model Risk Assessment

The ALM model risk assessment service is focused on the regulatory mandate you have to assess your embedded model risk. This includes a review of basic data inputs and all category set-up attributes for each category in your chart of accounts. MountainView fully reviews all assumption inputs including contractual and behavioral for both net interest income and market value assessments. We confirm model outputs for risk reporting.

In our reports, we rank the technical specifications of your model based on our assessment of model quality given current business and compliance needs, and relative to similar peer models recently assessed. We then prioritize the model findings by level of importance or model risk materiality.

Optional Components

Our validations can be further customized to meet your needs. MountainView can provide you with model back tests, full source data audits, consulting services to enhance ALCO policies and processes and other custom deliverables with most reports. We also have solutions for quantifying core deposit behavior and value inputs, defining loan prepayments and paydowns, non-linear rate ramps and other model input needs.