Rethinking Model Validation in the Age of Machine Learning

• Mar 11, 2023
• By Mike Morris

For financial institutions, the concept of model validation is not necessarily new. As soon as banks and credit unions began automating certain loan decisioning and back office processes, it became necessary to conduct testing to compare the output of that automation against real-world scenarios to ensure their accuracy and effectiveness. At a certain point, regulators formalized requirements for model validation and reporting and the industry has continued along that path for years. What is different today is the introduction of much more sophisticated machine learning and artificial intelligence (AI) capabilities into the business of banking...

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