A/L Model Review

Through our VBCBa/lance division, we offer Asset/Liability Model Review – a regulatory requirement.

A/LM Model Review is variously referred to as assessment, audit, validation, and/or verification. We follow the format and terminology presented in OCC Bulletin 2000-16. In addition, we also incorporate guidance from the FDIC's Model Governance issuance.

The customary review deliverables are as follows:

Executive Summary
This three- to five-page summary highlights the suitability of the model, given the complexity of your balance sheet, and a synopsis of the overall process, systems, and staff.
Assessment Procedures
The input, processing, and reporting components are examined to determine if the A/LM model process is effective in evaluating and reporting relevant risk measures.
Benchmarking Procedures
The input, processing, and reporting components are examined to determine if appropriate benchmarks are used for key assumptions, valuation metrics, and reporting.
Comparative Procedures
The input, processing, and reporting components are examined to determine if appropriate back-testing processes are used for key assumptions as well as income, liquidity, and valuation metrics.
Data Validity & Control Environment
Recent regulations, including Sarbanes-Oxley, require the use of validated data in a secure control environment, whether the A/LM analysis is prepared in-house or outsourced. We review:
  • The control environment (to the extent possible).
  • Process documentation, including A/LM model set up and configuration.
  • Data validation and data management reports (to the extent possible).
Value of Service
This A/LM Review includes recommendations that not only identify potentially problematic areas, but identify "better practice" solutions that will potentially improve efficiency. The findings are evaluated for material impact on earnings, liquidity, and valuation measures. They are then prioritized based on materiality and ease of implementation.
Consulting Services
Consulting assistance is available to enhance the effectiveness and efficiency of your A/LM process from the initial model selection and implementation phase through the final board reporting and education phases.

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