The Agencies Replace SR 11-7: What the 2026 Model Risk Management Guidance Means for Model Use in Banking

The document examines how the Federal Reserve, OCC, and FDIC's new model risk management guidance SR 26-02 (issued April 17, 2026) replaces the 15-year-old SR 11-7 framework, with key changes including a narrower model definition that excludes spreadsheet arithmetic and deterministic rule-based systems, explicit carve-outs for generative and agentic AI, and applicability primarily to institutions above $30 billion in assets. The guidance creates a governance gap for AI-driven commercial real estate workflows by placing statistical models within the MRM perimeter while excluding generative layers, extraction pipelines, and orchestration logic, meaning banks have regulatory latitude in deploying agentic AI for CRE underwriting but remain responsible for downstream risks that feed into pricing and credit estimates.