ALM Model Validation

More than a regulatory “check box,” our ALM model validations make sure your ALCO is getting the information it needs to make the key strategic decisions at the right time.

The reason you have an ALCO process in place should not be exclusively to receive a “check” on your regulatory exam. Therefore, the reason you get that process independently validated should not be solely to comply with regulatory requirements. The reason to do a model/process validation is to ensure that you are preparing an accurate assessment of your bank’s risk profile.

Anticipating a Visit from Your Regulators? Be prepared and read DCG Managing Director Patrick Ward’s article.

The ALM modeling process has increased in complexity over the years—due to new products, technological advancements and regulatory requirements. Understanding the intricacies of these models requires a level of expertise beyond most internal audit functions and outside vendors.

DCG’s ALM Model Validation service provides banks with the industry’s most complete review of their entire ALM process. No stone is left unturned as our team of experts reviews all aspects of your interest rate risk (IRR) modeling process, including but not limited to:

  • Accuracy and completeness of source data files
  • Appropriateness of scenarios analyzed
  • Adequacy of model structure
  • Development and support of key model assumptions
  • Sufficiency of internal validation processes
  • Procedural documentation
  • IRR policies
  • Substance and structure of ALCO reporting package

The decisions that are made based upon the results of your IRR model are critical to the ongoing success of the bank. Why would you consider a validation that does not get into the details of the modeling process to ensure the results are reliable? If you wouldn’t execute a strategy without fully understanding all of the implications, you shouldn’t perform a validation without the same level of scrutiny.