| 13.13 | For those trading desks that are permitted to use the IMA, all risk factors that are deemed to be modellable must be included in the bank’s internal, bank-wide ES model. The bank must calculate its internally modelled capital requirement at the bank-wide level using this model, with no SAMA constraints on cross-risk class correlations (IMCC(C)).
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Banks design their own models for use under the IMA. As a result, they may exclude risk factors from IMA models as long as SAMA does not conclude that the risk factor must be capitalised by either ES or SES. Moreover, at a minimum, the risk factors defined in [11.1] to [11.11] need to be covered in the IMA. If a risk factor is capitalised by neither ES nor SES, it is to be excluded from the calculation of risk-theoretical P&L.
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| 13.14 | The bank must calculate a series of partial ES capital requirements (ie all other risk factors must be held constant) for the range of broad regulatory risk classes (interest rate risk, equity risk, foreign exchange risk, commodity risk and credit spread risk). These partial, non-diversifiable (constrained) ES values (IMCC(Ci)) will then be summed to provide an aggregated risk class ES capital requirement.
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| 13.15 | The aggregate capital requirement for modellable risk factors (IMCC) is based on the weighted average of the constrained and unconstrained ES capital requirements, where:
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| | (1) | The stress period used in the risk class level ESR,S,i should be the same as that used to calculate the portfolio-wide ESR,S.
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| | (2) | Rho (ρ) is the relative weight assigned to the firm’s internal model. The value of ρ is 0.5
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| | (3) | B stands for broad regulatory risk classes as set out in [13.14].
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The formula specified in [13.15], IMCC = (IM(C) + (1 - ρ)(Σ IMCC(Ci)), can be rewritten as IMCC = ρ(IMCC(C)) + (1 - ρ)  (IMCC(C)) with IMCC(C) =  While ESR,S, ESF,C and ESR,C must be calculated daily, it is generally acceptablethat the ratio of undiversified IMCC(C) to diversified IMCC(C),  , may be calculated on a weekly basis.
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By defining ω as ω = ρ + (1 - ρ).  the formula for the calculation of IMCC can be rearranged, leading to the following expression of IMCC: IMCC = ω ∙ (IM(C)). Hence, IMCC can be calculated as a multiple of IMCC(C), where IMCC(C) is calculated daily and the multiplier ω is updated weekly.
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Banks must have procedures and controls in place to ensure that the weekly calculation of the “undiversified IMCC(C) to diversified IMCC(C)” ratio does not lead to a systematic underestimation of risks relative to daily calculation. Banks must be in a position to switch to daily calculation upon SAMA direction.
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