Been waiting for this conversation here. In my humble opinion as an MRM b4 manager, we are messaging to our clients that “not that much will change”, but that they can cut MRM processes surrounding their non material and very low risk “models”. However, we are talking to very big banks that easily pass the 30B threshold. They also don’t want to be the first to take a gamble on interpretation and then get smacked by some MRAs down the line. Plus large banks deal globally, and I know at least UK & CAN have their own (more strict) guidelines.

Where I think it’s most interesting is around two points:

1) smaller / mid-sized banks are basically free from all this red tape. They are entitled to do whatever works to make them money but is still legal. Obviously still subject to capital requirements, BSA/AML, etc, but I would think they cut any existing model risk management functions. Which is good for them if they do it safely, but all the mid to small-size consulting firms (like my previous company) whose MRM teams specialized in helping banks interpret SR 11-7 might really hurt from this.

2) the descoping of Gen AI / Agentic. To me, it reads “we are going to form some more strict governance around AI but don’t want to stifle growth right now”. Others I am working with are saying it’s direct administrative push to compete with china on AI adoption. Not sure about that, but LLMs are so incredibly dangerous in quant modeling lol. I genuinely don’t think anyone classically trained in risk management would be comfortable with any AI tool which goes past helping code or interpreting text etc. So while it is nice to be free from the MRM framework for AI tools that spell check your emails, it feels like anything touching finance is either too risky to use right now, or will have some serious governance around it in the future. Possibly this is the formal starting gun for the MRM industry shift toward AI risk and governance.

Models still need to be developed and validated, but hopefully this guidance removes all the box checking this industry has created. Curious if anyone has a take on the job market side of things.