This paper deals with residual generation for the diagnosis of faults in the presence of disturbances. The emphasis is on modelling errors, represented as multiplicative disturbances, and on parametric faults. These are both characterized as discrepancies in a set of underlying parameters. The residuals are obtained using parity equations. To address the situation when the number of uncertain parameters is too high to allow perfect decoupling, two approximate decoupling methods are introduced. One utilizes rank reduction of the model-error/fault entry matrix via singular value decomposition. The other minimizes a least squares performance index, formulated on the residuals, under a set of equality constraints. It is shown that, by the appropriate construction of the entry matrix or of the performance index and the constraints, a broad variety of structured and directional residual strategies can be implemented.