16. Portfolio concentration

Institutions‟ IRC models should reflect issuer concentrations, which, for example, may arise from a lack of regional or industry diversification or from large exposures to individual or connected issuers. Institutions should evidence the overall appropriate capture of issuer concentration risks within the IRC. To this purpose, institutions should validate and document notably, but not only, that the IRC model result increases with the level of concentration of their portfolio.

An institution has to prove specifically that its approach captures portfolio concentrations appropriately.

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