63. Because of the complexity involved in modelling hypothetical and macroeconomic-based risk …

Because of the complexity involved in modelling hypothetical and macroeconomic-based risk factors/scenarios, institutions should be aware of the model risk involved and ensure that the following have been performed when setting those factors/scenarios:

• a) a regular and sufficiently conservative expert review of the model’s assumptions and mechanics has been performed and a conservative modelling approach to account for model risk has been followed;
• b) a sufficient degree of conservatism as appropriate has been applied when making assumptions that are difficult to measure in a quantitative way (e.g. diversification, exponential growth projected, fees projected, forward-looking management views) but may have an impact on the model’s outputs (e.g. the outputs of pre-provision net revenue models should be based on sufficient statistical support as well as business considerations); and
• c) the dependencies and sensitivities of the results on the assumptions have been acknowledged and their impact is assessed on a regular basis.

1. Forbhreathnú

1.1 Tagairtí

1.2 Ceanglais aitheanta

1.3 Caighdeáin ghaolmhara

2. Ceanglais aitheanta

3. Caighdeáin ghaolmhara

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