15. Systemic risk factors

Il-mudelli tal-IRC tal-istituzzjonijiet għandhom jirriflettu l-konċentrazzjonijiet tal-emittenti, li, pereżempju, jistgħu joħorġu minn nuqqas ta‟ diversifikazzjoni reġjonali jew industrijali jew minn esponimenti kbar għal emittenti individwali jew konnessi. L-istituzzjonijiet għandhom jipprovdu evidenza tal-kopertura totali xierqa tar-riskji ta‟ konċentrazzjoni tal-emittenti fl-IRC. Għal dan il-għan, l-istituzzjonijiet għandhom jivvalidaw u jiddokumentaw sew, imma mhux biss, li r-riżultat tal-mudell tal-IRC jiżdied skont il-livell ta‟ konċentrazzjoni tal-portafoll tagħhom.

Istituzzjoni għandha speċifikament tipprova li l-approċċ tagħha jkopri l-konċentrazzjonijiet tal-portafoll b‟mod xieraq.

The correlation between systemic risk factor(s) and individual issuer‟s „ability-to-pay process‟ may be difficult to estimate because they are not directly observable. Any estimation technique based directly or indirectly on observable market data (as in the case of listed equity) should be duly justified and documented.

Where an institution chooses a parametric formula assuming multiple systemic risk factors, thus better reflecting industry or regional concentration than when assuming a unique systemic risk factor, the choice of the parametric formula should be analysed and validated, for example by comparing the results of the current model with the outcome of a modified version of the same model that uses the IRB formula and where all systemic risk factors are perfectly correlated.