IFRS9
IFRS 9 : Estimation Of Expected Credit Loss For Financial Assets In The Banks Under IFRS 9, the expected credit loss (ECL) is used to estimate the risk of loss due to a borrower's failure to repay a loan or meet contractual obligations. It is directly linked to credit risk, which is the possibility of a loss resulting from a borrower's inability to repay a loan or meet credit obligations. 🟦 Formula For Calculation of ECL The ECL is calculated by multiplying the PD, LGD, and EAD, adjusted by the discount factor for the present value of the expected loss. ECL = PD% *LGD% *EAD *DF% 🟦 Components Of ECL ECL calculation involves 4 key components: ▪️ Exposure at Default (EAD) ▪️ Probability Of Default (PD) ▪️ Loss Given Default (LGD) ▪️ Discount Factor (DF) This approach helps in provisioning for potential losses, ensuring that lenders maintain adequate capital reserves to cover credit risks. 1️⃣ Exposure At Default EAD estimates the total amount at risk at the time of d...