Post-model adjustments for expected credit losses during COVID-19

Post-model adjustments for expected credit losses during COVID-19

Publication date: 07 May 2020

COVID-19

Issues of the month
Banks calculate expected credit losses (‘ECLs’) under IFRS 9 using forward-looking judgements, models and data. Overlays, or post-model adjustments, are often used to address shortcomings where models or data have limitations. As a result of severe economic conditions and uncertainty arising due to coronavirus (COVID-19), there is an increased need to apply overlays in calculating ECLs. In this publication, we provide considerations that might be helpful in developing and monitoring such overlays.
 
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