SR 26-2 Excludes Generative AI From Bank Model Risk Governance

On April 17, 2026, the Federal Reserve, OCC, and FDIC issued SR 26-2, which supersedes the longstanding SR 11-7 guidance, to update model risk management expectations for traditional statistical and machine learning models used in banking. Notably, SR 26-2 excludes generative and agentic AI models from its scope, leaving banks to independently devise and justify their governance approaches for these AI systems, which are not covered by any prescriptive federal framework. This shift places the onus on banks to demonstrate control over AI systems that impact credit, underwriting, and operational decisions by documenting data lineage and decision logic through source code analysis, rather than relying on compliance checklists. As banks navigate this regulatory gap, they must prepare to substantiate their AI governance practices during audits, emphasizing the importance of creating a reconstructible record of AI processes to meet examiner expectations.

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