This section refers to all model types including, but not limited to, rating models. Manual overrides of model inputs and outputs are possible and permitted but within limits. For this purpose, institutions must put in place robust governance to manage these overrides. Such governance must be reviewed by the internal audit function. Institutions must implement limits and controls on the frequency and magnitude of overrides. Models whose input and/or outputs that are frequently and materially overridden must not be considered fit for purpose and must be recalibrated or replaced.
8.4.2
During the execution phase, input and/or output overrides must be documented, justified and approved at the appropriate authority level. When necessary, an opinion from technical subject matter experts should be produced. Overrides used by the business lines must be subject of review by the risk management function before being implemented.
8.4.3
The development and validation teams must analyse and understand the reasons for input and/or output overrides and assess whether they are caused by model weaknesses. Overrides must be tracked and reported to the Model Oversight Committee, Senior Management and the Board as part of the monitoring and validation processes.
8.4.4
If a model has been approved and is deemed suitable for production, its outputs must not be ignored. This also applies when model outputs are not meeting commercial expectations. Model outputs must be considered objectively and independently from actual, potential or perceived business line interests.