CBE published a circular on revisions to the models used in the calculation of expected credit losses (ECL). The circular states the decision requiring banks to review the models used in calculating ECL, identify factors that were not taken into account when designing these models, and verify validity of the methodology used in calculating ECL. It has also been decided that banks would “verify the measurement of the quality, adequacy, and efficiency of information systems and the current and future information used in the design of models.” The circular requests stakeholders to refer to the instructions, which were issued by CBE in February 2019, regarding the application of IFRS 9. These instructions noted that banks need to verify the integrity and effectiveness of models used in the calculation of ECL.
Related Link: Circular (PDF in Arabic)
Keywords: Middle East and Africa, Egypt, Banking, Accounting, IFRS 9, ECL, Credit Risk, CBE
Scott is a Director in the Regulatory and Accounting Solutions team responsible for providing accounting expertise across solutions, products, and services offered by Moody’s Analytics in the US. He has over 15 years of experience leading auditing, consulting and accounting policy initiatives for financial institutions.
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