In our previous blog, we discussed the need for a comprehensive Target Operating Model to serve as a framework for Internal Model Method (IMM) compliance programs.  Another important element in an effective program is a solid regulatory communications strategy.  Contact with regulators is essential to address open questions and to help manage overall expectations in advance of regulatory exams. 

The regulatory strategy should reach all pertinent regulators and all key themes, providing the appropriate level of detail in response to inquiries.  All communications with the regulators should be documented to maintain an audit trail that can be recalled as needed, and the bank should determine the type and level of documentation required to meet regulators’ expectations. 

Communications should be standardized, with a review process to vet all documents before they are sent and discussed.  Each session with the regulators typically covers one specific focus area―such as simulation models―so those responsible for that area should be prepared with anticipated questions and topics for review. 

A dedicated function should manage regulatory requirements, examination dates and deadlines.  Program leads should define who will communicate what information to the regulators, and at what frequency, and these leads should be trained in how to structure conversations and stay on message.  It is also important to understand what has previously been communicated to regulators and to expand upon this baseline of information in further discussions. 

As this series has shown, banks should demonstrate a transparent, controlled and comprehensive technology platform when seeking regulatory approval.  For more information, see SlideShare deck: “Considerations for an Effective Internal Model Method Implementation” 

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