20  20  The Federal Reserve’s Model Risk Management guidance (SR 11-7) establishes an expectation that models used in banking are conceptually sound or “fit for purpose.” SR 11-7 instructs that when evaluating a model, supervised institutions should consider the “[t]he design, theory, and logic underlying the model.” The Model Risk Management guidance discusses in detail the tools banks rely on to help establish the soundness of their models, such as back-testing and benchmarking and other outcomes-based tests.
11  To that end, we are exploring whether additional supervisory clarity is needed to facilitate responsible adoption of AI. It is important that we hear from a wide range of stakeholders— including financial services firms, technology companies, consumer advocates, civil rights groups, merchants and other businesses, and the public.