CFO Slice

New joint guidance from the Federal Reserve and Office of the Comptroller of the Currency on model risk management has removed generative and agentic artificial intelligence (AI) from its scope, creating greater flexibility for banks but leaving significant questions around governance, accountability, and risk management unanswered. The updated guidance, which replaces the long-standing SR 11-7 framework introduced after the 2008 financial crisis, acknowledges that generative and agentic AI technologies are evolving too rapidly to fit within existing model risk standards. While banking groups have welcomed the move as reducing barriers to innovation, experts warn that regulators have not provided a replacement framework, leaving institutions responsible for developing their own controls, monitoring processes, and accountability structures. Risks include cascading errors across multiple AI systems, unclear ownership of decisions, potential regulatory breaches, and increasing legal exposure.