Page 42 - 2021 ANNUAL REPORT draft

Forward-looking information

The measurement of expected credit losses for each stage and the assessment of significant increases
in credit risk considers information about past events and current conditions as well as reasonable and
supportable forecasts of future events and economic conditions. The estimation and application of
forward-looking information requires significant judgement.
The measurement of expected credit losses for each stage and the assessment of significant increases
in credit risk considers information about past events and current conditions as well as reasonable and
supportable forecasts of future events and economic conditions. The estimation and application of
forward-looking information requires that:

• The Bank uses internal subject matter experts from Risk, Treasury and Business Divisions to
consider a range of relevant forward looking data, including macro-economic forecasts and
assumptions, for the determination of unbiased general economic adjustments in order to
support the calculation of ECLs.

• Macro-economic variables taken into consideration include, but are not limited to,
unemployment, interest rates, gross domestic product, inflation and exchange rate, and requires
an evaluation of both the current and forecast direction of the macro-economic cycle.

• Macro-economic variables considered have strong statistical relationships with the risk
parameters (LGD, EAD, CCF and PD) used in the estimation of the ECLs, and are capable of
predicting future conditions that are not captured within the base ECL calculations.

• Forward looking adjustments for both general macro-economic adjustments and more targeted
at portfolio / industry levels. The methodologies and assumptions, including any forecasts of
future economic conditions, are reviewed regularly.

Macroeconomic factors

The Bank relies on a broad range of forward looking information as economic inputs, such as: GDP
growth, unemployment rates, central bank of The Gambia base rates, inflation rates and foreign
exchange rates. The inputs and models used for calculating expected credit losses may not always
capture all characteristics of the market at the date of the financial statements. To reflect this, qualitative
adjustments or overlays may be made as temporary adjustments using expert credit judgement.

The macroeconomic variables and economic forecasts as well as other key inputs are reviewed and
approved by management before incorporated in the ECL model. Any subsequent changes to the forward
looking information are also approved before such are inputted in the ECL model.

The macro economic variables are obtained for 3 years in the future and are reassessed every 6 months
to ensure that they reflect prevalent circumstances and are up to date.

Where there is a non-linear relationship, one forward-looking scenario is never sufficient as it may result
in the estimation of a worst-case scenario or a best-case scenario. The Bank’s ECL methodology
considers weighted average of multiple economic scenarios for the risk parameters (basically the forecast
macroeconomic variables) in arriving at impairment figure for a particular reporting year. The model is
structured in a manner that the final outcome, which is a probability, cannot be negative.
SICR is assessed once there is an objective indicator of deterioration in credit risk of customer. In
addition, the Bank as part of its routine credit processes performs an assessment on a quarterly basis to
identify instances of SICR.
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Guaranty Trust Bank (Gambia) Limited Financial Statements December 2021