Compound correlation
The independent model
cannot see it.

The standard model stress tests each sector independently and sums the results. That approach systematically understates NPL risk when the stresses share a single source — as they do here, where industrial, consumer, and SaaS exposure all trace back to the same Hormuz signal environment. Cross-sector correlation in compound events produces outcomes that are not additive: when the same signal simultaneously activates multiple transmission paths, the interaction terms between them create provision gaps that independent models structurally cannot see. PHM calibrates the compound factor at 1.8–2.6× from three historical precedents where simultaneous multi-sector activation from a shared source was documented: the 1973 oil shock, the 1980 stagflation cycle, and the 2022 European energy crisis. When the same signal hits multiple sectors at once, losses multiply rather than add. The BIS documented this in 2023. PHM's 1.8–2.6× range is what that multiplication has looked like historically. PHM applies this compound model to the specific book structure and produces €28.2M in provision against the standard model's €16.4M. The €11.8M gap is not a conservative adjustment. It is the compound interaction factor applied to a specific book at a specific moment.

Three scenarios share the compound signal environment. What changes is whether industrial and consumer stress resolves before the provision is realised, and whether institutional clients act on the compound read before the CFO brief.

Institutional clients — pension funds, sovereign wealth, family offices — are making Q2 allocation decisions against the same macro assumptions the IMF flagged as fragile this week. The CFO who briefs proactively with the compound read retains the allocation. The one who waits for Q3 to confirm it manages a redemption conversation instead. The preparation window is 6 weeks — not because the numbers change, but because the institutional allocation decision cycle runs on a 6-week lag from the macro signal to the reweighting meeting.