Institutions must remain the owners of their models at all times, under all circumstances. They must remain accountable for all modelling choices, even in the case of support from a third party consultant for any of the steps in the life-cycle.
4.7.2
If modelling support is provided by a third party, institutions must take the necessary steps to transfer knowledge from that third party to internal employees within a given time frame. This requirement applies to any of the steps of the model life-cycle.
4.7.3
Third party providers may offer a range of modelling contributions covering, amongst others, methodological support, system infrastructure, validation services and ready-made calibrations based on external data. Institutions must take the necessary action to fully understand the contributions provided by third parties. This requirement applies to all models and to all risk types.
4.7.4
In the case of methodological support, whilst institutions must operate within the constraints of the acquired model, they must demonstrate that the method is adequate to their portfolios. If a methodology acquired from a third party is not fully understood by the institution, then it must not be considered fit for purpose. If a third party provides a methodology to an institution, any subsequent validation exercise must be performed by an internal or external party independent from the original provider.
4.7.5
If a third party provides a ready-made calibrated model based on external data, such a solution must be justified, based on the following specific circumstances:
(i)
For portfolios and metrics for which an institution is not able to collect sufficient internal data, then externally calibrated models are acceptable. For instance, this applies in the case of low default portfolios or small portfolios for which data collection may not lead to statistically representative samples.
(ii)
For portfolios and metrics for which an institution is in a position to collect internal data, then externally calibrated models must not be used. Externally calibrated models are acceptable, only temporarily over the short term until sufficient data is collected. In this case, immediately after the model implementation, institutions must take the necessary actions to (i) collect historical internal data from internal systems and (ii) collect future internal data in order to develop a model internally.