A U.S. bank's model risk team receives examination findings from federal regulators citing inadequate independent validation and insufficient ongoing monitoring of credit decision models. Which regulatory guidance is the examiner most likely citing?
Select an answer to reveal the explanation.
Short Explanation and Infographic
Think of it this way: in real-world AI governance, sr 11-7 — u.s. federal reserve and occ guidance covering model development, independent validation, and ongoing monitoring for banks is exactly what teams reach for when they need to handle this scenario. SR 11-7 is U. On the exam, remember that this falls squarely under the 1.0 AI Governance Overview domain.
Full explanation below image
Full Explanation
SR 11-7 is U.S. Federal Reserve and OCC guidance on model risk management for banks. Its three pillars are: model development and implementation, independent model validation, and ongoing monitoring. The correct answer, "SR 11-7 — U.S. Federal Reserve and OCC guidance covering model development, independent validation, and ongoing monitoring for banks", directly addresses the scenario described because it aligns with the specific governance requirement in question. The incorrect options ("NYC Local Law 144 — requires annual bias audits and candidate notification for automated employment decision tools used by NYC employers", "The EU AI Act — classifies credit scoring as high-risk AI requiring third-party conformity assessments before deployment", "ISO/IEC 42001 — the international AI management system standard adopted by U.S. financial regulators") may seem plausible but do not satisfy the core requirement. Understanding the distinction between these concepts is critical for IBM watsonx.governance implementations and is frequently tested in the 1.0 AI Governance Overview section of the certification exam.