Solutions · FCA SMCR · Model Risk Governance

OMEGA for Financial Accountability

SMCR places personal accountability on named individuals for decisions taken inside the firm. When the decision is partially or fully delegated to a model, the evidence trail typically does not survive scrutiny. OMEGA produces a per-decision record built for that scrutiny.

The accountability gap

The FCA's Senior Managers and Certification Regime (SMCR), and the parallel PRA regime for dual-regulated firms, place named individuals under personal regulatory liability for the decisions taken within their area of responsibility. The Senior Manager Conduct Rules require them to take reasonable steps to ensure their area is controlled effectively and complies with regulatory requirements.

Model risk frameworks add a second layer. In the US, Federal Reserve SR 11-7 (2011) sets out supervisory expectations for model risk management. In the UK, PRA Supervisory Statement SS1/23 (effective May 2024) requires banks to identify, govern, and monitor models across the model lifecycle.

Both frameworks require post-hoc reconstruction of model-influenced decisions. Firms typically produce documents - policies, model cards, validation reports - not records. When a regulator asks for the evidence supporting a specific decision, what surfaces is the model card and the policy, not a binding between the named accountable individual and the decision the model influenced.

What an OMEGA per-decision record contains

Authority. The decision binds to the Senior Manager Function (SMF) holder whose Statement of Responsibilities covers it (P1). Delegation chains down to the operator who executed the decision are recorded under P6 (Delegation) and P6L (Liability Threshold).
Model competence. The model version, its validation status, and the named individual who attested to its fitness bind to the decision under P10 (Competence Attestation). A model running outside its validated envelope is a competence failure, visible on the record.
Update integrity. When the model is retrained or recalibrated, the expectation the firm holds for it must be updated under controlled conditions (P11, Expectation Update Integrity). Drift between the live model and the model the Senior Manager attested to is detectable.
Reasoning and alternatives. The evidence considered and the rejected alternatives are recorded (P2). For decisions made under model influence, the model's output is one input to the reasoning graph - not its sole content.
Materiality. The financial consequence of the decision is bound to its authority scope (P4M, Materiality Binding). Aggregate materiality across sub-decisions is preserved (P6A) so a stream of small decisions cannot launder past a material threshold.
Chain integrity. The record cannot be rewritten after the fact without detection (P_ChainIntegrity).

Worked example: model-influenced credit decision

Scenario. A bank's lending platform uses an internal model to score commercial credit applications. A borderline application is approved at £2.5m. Eighteen months later the loan defaults and the FCA opens an enquiry. The accountable Senior Manager is asked to demonstrate that reasonable steps were taken and the model was operating within its validated envelope at the time.

Conventional response. The firm produces the model card, the validation report, the credit policy, and the application file. None of these directly bind the Senior Manager to the live decision. The model card describes the model at validation; the firm cannot easily prove the live model on the approval date matched the validated model.

OMEGA record. P1 names the SMF holder. P10 records the model version hash and the named individual who attested to its fitness, with the live hash matching the attested hash. P11 records that no expectation update was outstanding. P2 contains the credit officer's reasoning DAG, with the model score as one input among the financials, the security, and the sector view. P4M binds the £2.5m materiality to the SMF holder's delegated authority. The hash chain is intact.

Model governance integration

OMEGA does not replace the firm's model risk management framework. It produces the record that ties an individual model-influenced decision back to the framework's artifacts. Model card metadata binds to P10. The model change-management process binds to P11. Validation reports continue to exist as separate artifacts referenced from the record.

What this does not do

OMEGA does not approve the model, validate its outputs, or substitute for the firm's first- and second-line model risk processes. It produces the artifact a Senior Manager can stand behind under SMCR scrutiny - a fixed-structure record of which model influenced which decision, under whose authority, against what expected outcome, with what alternatives rejected.

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