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For IFRS 9 impairment calculations, point-in-time forward-looking credit assessments are prone to be responsive to the economic environment and the periodic revision of the economic outlook. Therefore, the management of provision variances over time is a particular area of focus.

In this webinar, we will discuss the approaches to forward-looking expected credit loss assessment, including:

Designing macroeconomic assumptions that explain trends taking place in a given portfolio.

Providing quantitative measurements to anticipate and manage variance in expected credit losses.

Aligning impairment measurement with the institution's risk appetite statement, and demonstrating sound governance practices.

Related Insights

Reducing Volatility in IFRS9 Provisions & Earnings, Through Governance and Credit Decision

As preliminary IFRS9 results are being released, many institutions have concerns about variations in point-in-time credit assessment and forward-looking credit forecasts. These measurements are responsive to the economic environment, and highly dependent on changes in an institution’s macroeconomic outlook. Moreover, the variance in provision charges amplified by IFRS9 stage transitions can simultaneously affect correlated segments in the portfolio.

October 2017 WebPage Roshni Patel, Pierre Gaudin

Anticipating and Benchmarking Variance in IFRS 9 Expected Credit Losses

Many financial institutions are designing their model overlay with a view to manage macroeconomic forecast uncertainty and model risks. For this purpose, aside from the expected credit losses, risk management teams can provide the finance department with more measurements to anticipate variability and uncertainty levels around expected credit losses. This document discusses risk measurements that can be leveraged to achieve these objectives.

July 2016 Pdf Pierre Gaudin

Managing IFRS 9 expected credit losses variance and forecast uncertainty

As financial institutions are currently focusing on the execution of their IFRS 9 program and solution integration, risk and finance teams are working together to anticipate their effect on the financial reports. Especially, on the impairment modeling side, point-in-time forward-looking credit assessments are prone to be more responsive to the surrounding economic environment than the through-the-cycle measurements in practice so far. As institutions are anticipating some variability of provisions levels in relation to evolving macro-economic assumptions as well as forecast uncertainty, the details of the macro-economic outlook and scenario assumptions as well as clarifications of provision variances over time, are set to be a particular area of focus.

June 2016 Pdf Pierre Gaudin

Modeling Techniques in Scenario-Based Risk Appetite Management

To get senior stakeholders to buy in to alternative macroeconomic scenarios, risk management and ALM teams must assemble risk models and risk-adjusted performance measurements in their simulation tools. Institutions must switch from a qualitative to a quantitative approach to analysis.

May 2015 WebPage Pierre Gaudin

Leveraging Basel III Compliance Implementations

This article examines how regulatory compliance initiatives worldwide have shaped current risk management systems and practices. It then covers the challenges and benefits of funds transfer pricing practices, profitability analysis, and stress testing-based governance practices.

November 2014 WebPage Pierre Gaudin

Optimizing the Capital Ratio under Basel III

This paper explores the integration of credit and liquidity risk in Basel III, and shows how banks can optimize their capital under Basel III.