IFRS 9 Implementation and Expected Credit Loss Modelling

This intensive programme provides comprehensive coverage of IFRS 9 implementation for SME banks, focusing on the transition from incurred loss to expected credit loss models. Participants will develop practical skills in building and validating ECL models, understanding the three-stage approach, and implementing forward-looking information in credit loss calculations. The programme addresses the particular challenges SME banks face in developing robust ECL models with limited historical data and resources.

The course combines theoretical understanding with extensive practical exercises using real-world SME portfolio data. Special emphasis is placed on the interaction between IFRS 9 and Basel III regulatory capital calculations, ensuring participants understand both accounting and regulatory implications of their modelling choices.

At the end of the course the participants would:

• Master the IFRS 9 three-stage classification methodology
• Build and validate probability of default, loss given default, and exposure at default models for SME portfolios
• Implement forward-looking information and multiple economic scenarios in ECL calculations
• Understand the interaction between IFRS 9 and regulatory capital under Basel III
• Develop robust governance frameworks for ECL model management
• Navigate practical implementation challenges specific to SME lending

IFRS 9 Framework and Principles

• Evolution from IAS 39: key conceptual changes
• Three-stage approach: classification and measurement
• Significant increase in credit risk determination
• Definition of default and credit-impaired assets

Expected Credit Loss Methodology

• PD, LGD, and EAD modelling for SME portfolios
• 12-month vs. lifetime ECL calculations
• Incorporation of forward-looking information
• Multiple economic scenario development and weighting

Practical Model Development

• Data requirements and quality assessment
• Statistical techniques for SME ECL modelling
• Model validation and performance testing
• Handling of low default portfolios and limited data

Implementation and Systems

• IT systems and data architecture requirements
• Integration with existing credit risk systems
• Regulatory reporting and disclosure requirements
• Change management and stakeholder communication

Advanced Topics

• Interaction with Basel III regulatory capital
• Treatment of guarantees and collateral in ECL models
• Post-model adjustments and management overlays
• Ongoing monitoring and model recalibration