A regional bank’s model validation process has come under regulatory scrutiny for lacking an analytic framework for testing their consumer loan models on a consistent basis.
The bank determined that it could leverage Five Bridges’ whole loan analytics by using JWL to test their model’s performance over a battery of statistical tests trained on different samples.
Through the use of the JWL’s model fit capability, model reviews could be conducted on a routine basis by comparing actual (sample)to model performance over time and over different statistical measures of goodness-of-fit applicable to their model specifications
The FBA modeling team worked with the bank’s model validation unit to import the bank’s models into the JWL Platform for analysis
Data mapping, inputs and assumptions necessary to feed the model validation analysis were worked out between the FBA and bank teams
To perform the review, Five Bridges’ model validation team leveraged JWL’s underlying prepay, default, and loss severity models for benchmarking purposes.
Following the review and benchmarking, the Five Bridges team compiled and documented recommendations to the client.
By incorporating the JWL Platform into its existing model validation process, the bank was able to address weaknesses in the process identified by its regulator.
Following the success in model validation, the bank has also elected to leverage JWL in its model development process in conducting Champion-Challenger exercises