64. Shortcomings of models and mechanisms that link risk factors with losses or increased risk …

Shortcomings of models and mechanisms that link risk factors with losses or increased risk parameters should be understood, communicated clearly and taken into account when interpreting results. Models should take into account the interactions between solvency and funding liquidity and funding costs in order to not systemically and significantly underestimate the impact of a shock. Where possible, results for different modelling approaches should be compared (e.g. for pre-provision net revenue models, a comparison between the model used and other possible approaches and the rationale for their rejection should be available). These links should be based on robust statistical models. However, if data availability or quality or structural breaks in historical data do not allow for meaningful estimates (e.g. for pre-provision net revenue models, it is necessary to have historical data covering an interest rate cycle and a business cycle, as well as information on changes in business strategy and organisation structure), quantitative analyses should be supported with qualitative expert judgements. Even where the underlying modelling process is robust, expert judgement should play a role in challenging model outputs.

1. Forbhreathnú

1.1 Tagairtí

1.2 Ceanglais aitheanta

1.3 Caighdeáin ghaolmhara

2. Ceanglais aitheanta

3. Caighdeáin ghaolmhara

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  EN: Guidelines and other publications of the European Banking Authority (EBA), https://www.eba.europa.eu/. © European Banking Authority. Reproduction is authorised provided the source is acknowledged (EBA legal notice). Divided into sections and converted into the GRCA format, the wording unchanged. Only the versions published by the EBA are authoritative.

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