CBUAE Model Management Standard and Guidance

The MMS&G aims to improve the quality of models, increase model homogeneity across the UAE, mitigate model risk, and reduce ECL underestimation. All banks and branches operating in the UAE are required to adhere to this.
The key components covered in the MMS&G are:

1. Model governance
2. Data management
3. Model development
4. Model implementation
5. Model usage
6. Performance monitoring
7. Independent validation

Immediate actions required

1. Banks are required to submit a gap assessment and remediation plan to the CBUAE by 21 June 2023 (i.e., within six months).
2. Failure to submit the gap assessment and remediation plan will trigger a compliance breach (Article 2.2.2 of CBUAE MMS).

How this may impact you

1. Meeting minimum quality standards
       o Recalibration of models and frameworks to ensure compliance with CBUAE MMS&G
2. Data issues
       o Development or refinement of data framework to ensure robust and consistent data
       o Review of data quality by ensuring consistent, unique and accurate data
       o Development of tolerance levels for data errors to ensure data is fit for use
       o Minimize the reliance on external data
       o Establishing new processes to collect and store data internally
3. Documentation
       o Define the documentation structure for every model
       o Establish a documentation governance process
4. Key personnel risks
       o Review of current resourcing and mitigate key person risk
       o Define the roles of the third party and ensure the transfer of knowledge
5. Assumptions
       o Critically assess all modeling assumptions and make relevant changes that may result in model changes

How can EY help?

EY, with extensive experience in regional and international markets, is best placed to assist you with the following:

1. Gap assessment
       • Gap assessment of your current model management practices against the Standard and the Guidance laid out by CBUAE including Data Management, Model Governance, Development, Implementation, usage and monitoring, and validation
       • Remediation planning with practical timelines considering your people, processes and systems
2. CBUAE-compliant model development and validation services
3. Outsourcing of model development and validation services to EY Managed Services
       • Reduce the operational overhead and cost by outsourcing development or validation while leaving the decision-making with you