After a pivotal change

The Central Bank of the United Arab Emirates (CBUAE) published a set of standards and guidance on model risk management (MRM) in December 2022, marking a pivotal moment in the regulatory landscape of the banking sector in the Middle East.

It establishes model risk as a material risk type and specifies enterprise-wide requirements for identifying, measuring, monitoring and controlling risk across all model types.

The CBUAE’s Model Management Standards (MMS) presents mandatory MRM to be implemented by institutions in the UAE based on international standards while considering local circumstances. MMS provides MRM standards for all models as well as specific requirements for the application of the standards.

The CBUAE’s Model Management Guidance (MMG) expands on technical aspects specific to certain model types. Briefly, MMS is general in nature and applies mandatorily to all models in an institution, whereas MMG deals with the technicalities of selected models in an in-depth manner.

This paper explores the key tenets of MMS and their implications for institutions, emphasising the need for a comprehensive approach to MRM that aligns with the CBUAE's requirements.