IFRS 9 Expected Credit Loss (ECL) and Credit Risk Modelling

The IFRS 9 Expected Credit Loss (ECL) and Credit Risk Modelling course is designed around the evolution of credit-loss accounting and modern credit-risk management under IFRS 9 Financial Instruments.

The global financial crisis highlighted weaknesses in the previous incurred-loss model under IAS 39, particularly the delayed recognition of credit losses. IFRS 9 was subsequently developed to provide a more forward-looking approach to financial-instrument impairment and to enable entities to recognise expected credit losses on a more timely basis. The impairment requirements became mandatory from 1 January 2018.

Under IFRS 9, entities assess expected credit losses using relevant historical information, current conditions and reasonable and supportable forecasts of future economic conditions. ECL measurement is probability-weighted and incorporates the time value of money.

The standard's general impairment approach uses a three-stage model:

• Stage 1 – Performing: 12-month ECL is recognised where there has not been a significant increase in credit risk since initial recognition.
• Stage 2 – Under-performing: Lifetime ECL is recognised when there has been a significant increase in credit risk.
• Stage 3 – Credit-impaired: Lifetime ECL continues to apply when the financial asset becomes credit-impaired.

The course therefore brings together IFRS 9 accounting requirements, credit-risk assessment, statistical modelling, probability of default, loss given default, exposure at default, macroeconomic forecasting, scenario analysis and ECL governance.

The importance of the subject remains significant. The IASB's post-implementation review concluded that IFRS 9 impairment requirements have resulted in more timely recognition of credit losses and provide useful information to users of financial statements.

Course Objectives

At the end of this programme, participants should be able to:

1. Understand the fundamental principles of IFRS 9 and its impairment requirements.
2. Explain the transition from the IAS 39 incurred-loss model to the IFRS 9 Expected Credit Loss model.
3. Understand the three-stage impairment model and the circumstances that trigger movement between Stages 1, 2 and 3.
4. Distinguish between 12-month ECL and lifetime ECL, including how each should be interpreted and measured.
5. Understand the concepts of:
   • Probability of Default (PD)
   • Loss Given Default (LGD)
   • Exposure at Default (EAD)
   • Discounting
   • Expected Loss
   • Credit Conversion Factors (CCF)
6. Develop a practical understanding of IFRS 9 ECL calculation methodologies.
7. Understand how to identify and assess a Significant Increase in Credit Risk (SICR).
8. Learn how historical credit-performance data can be used to develop credit-risk models.
9. Understand the role of forward-looking information and macroeconomic variables in ECL estimation. IFRS 9 requires reasonable and supportable information concerning past events, current conditions and forecasts of future economic conditions.
10. Understand how multiple economic scenarios and probability weighting can be incorporated into ECL calculations.
11. Learn how to assess portfolio-level and individual borrower credit risk.
12. Understand credit-risk segmentation, scorecards and portfolio monitoring.
13. Develop an understanding of PD/LGD/EAD modelling frameworks and their application to loan portfolios.
14. Understand model validation, back-testing and monitoring.
15. Identify common weaknesses and challenges in IFRS 9 ECL models.
16. Understand the relationship between credit risk management, financial reporting, capital management and profitability.
17. Improve participants' ability to interpret ECL results and challenge assumptions used by credit-risk and finance teams.
18. Understand appropriate governance, documentation and controls surrounding IFRS 9 ECL models.

Key Benefits of the Training

Participants will gain practical knowledge that enables them to:

• Improve IFRS 9 compliance: Develop a stronger understanding of the requirements governing expected credit-loss recognition and measurement.
• Improve credit-risk assessment: Learn how credit-risk information can be incorporated into the assessment and measurement of ECL.
• Understand credit-risk models: Gain practical familiarity with the major components of credit-risk modelling, including PD, LGD and EAD.
• Make better lending decisions: Understand how credit-risk information can support loan origination, monitoring, pricing and portfolio management.
• Improve financial reporting: Understand how ECL estimates ultimately affect impairment charges, profit or loss and financial statements.
• Strengthen portfolio management: Learn how institutions can identify deteriorating credit portfolios and emerging credit-risk concentrations.
• Incorporate economic conditions: Understand how forward-looking economic information can influence ECL estimates. IFRS 9 requires entities to consider relevant forward-looking information rather than relying solely on historical loss experience. 
• Improve model governance: Develop awareness of model validation, assumptions, limitations, controls and documentation.
• Enhance audit and regulatory readiness: Participants will better understand the evidence and processes needed to support ECL estimates and credit-risk judgements.
• Support strategic decision-making: A stronger understanding of expected credit losses can help management connect credit risk with profitability, capital and business strategy.

Who Should Attend?

This programme is particularly suitable for professionals working in:

• Banking & Financial Services
  • Chief Risk Officers
  • Chief Financial Officers
  • Credit Risk Managers
  • Credit Analysts
  • Relationship Managers
  • Loan Officers
  • Portfolio Managers
  • Treasury Professionals
  • Banking Operations Professionals
  • Risk Officers
  • Credit Administration Officers
• Finance & Accounting
  • Finance Managers
  • Financial Controllers
  • Accountants
  • Management Accountants
  • IFRS Specialists
  • Financial Reporting Officers
  • Internal Accountants
  • External Auditors
  • Internal Auditors
• Risk & Compliance
  • Enterprise Risk Managers
  • Operational Risk Managers
  • Risk Analysts 
  • Compliance Officers
  • Regulatory Reporting Officers
  • Model Risk Professionals
  • Internal Control Officers
• Data & Analytics
  • Data Analysts
  • Business Intelligence Analysts
  • Data Scientists
  • Credit Modelling Specialists
  • Quantitative Analysts
  • Statistical Modelling Professionals
  • Business Analysts
• Management & Executives
  • CEOs and Managing Directors
  • Executive Directors
  • Heads of Finance
  • Heads of Risk
  • Heads of Credit
  • Heads of Internal Audit
  • Heads of Compliance
  • Senior Banking Executives

The programme is also relevant to professionals in:

• Commercial banks
• Microfinance banks
• Fintechs
• Development finance institutions
• Mortgage institutions
• Insurance and financial-services organisations
• Leasing companies
• Investment companies
• Credit bureaux
• Government financial institutions
• Consulting firms
• Audit firms
• Regulatory and supervisory institutions.

Course Booking

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