Before revision:  Both effects stack up and the error tends to become even larger if in addition we assume a negative correlation between asset correlation and PD within the exposure pool, an assumption that is plausible in many circumstances and consistent with the Basel RWA formula.
After revision:  Both effects stack up and the error tends to become even larger if in addition a negative correlation between asset correlation and PD within the exposure pool, an assumption that is plausible in many circumstances and consistent with the Basel RWA formula.