Agency for Regulation and Development of the Financial Market of the Republic of Kazakhstan publishes first supervisory assessment finding banks model risk management remains at a formative stage

The Agency for Regulation and Development of the Financial Market of the Republic of Kazakhstan has published a report on the first supervisory assessment of model risk management systems at second-tier banks. The review found that the systems in the banks covered are still at a formative stage and require further development in corporate governance, independent control and model validation. The assessment marks the next step in risk-based supervision alongside the Supervisory Review and Evaluation Process, asset quality reviews and supervisory stress testing. It examined the maturity of model risk management across the three lines of defense and included independent validation of individual models. The report sets out the assessment approach and principles, analyzes the current state of model risk management in individual banks, and details supervisory expectations for effective frameworks covering both traditional models and models based on machine learning and artificial intelligence, drawing on international standards and practices.