Regulation required that banks should use independent validators. Besides being a requirement, it helps eradicate the risks as validators are experts; thus, the CRO is comfortable using an independent team of validators.

A is incorrect. Use of an independent validation does not reduce any cost that was meant for validation. B is incorrect. Developers are not required to validate a model. D is incorrect.

Things to Remember

• Independent validation is a crucial component of model risk management in financial institutions.
• It helps ensure that the models used by the institution are accurate, reliable, and in compliance with regulations.
• Independent validation provides an unbiased assessment of the model's performance and limitations.
• Regulators often require banks to have independent validation processes in place to mitigate model risk.
• The validation team should have the necessary expertise and independence to effectively evaluate the models.