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well as reasonable and supportable forecasts The macroeconomic variables and economic
of future events and economic conditions. The forecasts as well as other key inputs are
estimation and application of forward-looking reviewed and approved by management
information requires that: before incorporated in the ECL model. Any
subsequent changes to the forward-looking
The Bank uses internal subject matter information are also approved before such are
experts from Risk, Treasury and inputted in the ECL model.
Business Divisions to consider a range
of relevant forward-looking data, The macro economic variables are obtained for
including macro-economic forecasts 3 years in the future and are reassessed every
and assumptions, for the 6 months to ensure that they reflect prevalent
determination of unbiased general circumstances and are up to date.
economic adjustments in order to Where there is a non-linear relationship, one
support the calculation of ECLs. forward-looking scenario is never sufficient as
it may result in the estimation of a worst-case
Macro-economic variables taken into scenario or a best-case scenario. The Bank’s
consideration include, but are not ECL methodology considers weighted average
limited to, unemployment, interest of multiple economic scenarios for the risk
rates, gross domestic product, inflation parameters (basically the forecast
and exchange rate, and requires an macroeconomic variables) in arriving at
evaluation of both the current and impairment figure for a particular reporting
forecast direction of the macro- year. The model is structured in a manner that
economic cycle. the final outcome, which is a probability, cannot
be negative.
Macro-economic variables considered
have strong statistical relationships SICR is assessed once there is an objective
with the risk parameters (LGD, EAD, indicator of deterioration in credit risk of
CCF and PD) used in the estimation of customer. In addition, the Bank as part of its
the ECLs, and are capable of routine credit processes performs an
predicting future conditions that are not assessment on a quarterly basis to identify
captured within the base ECL instances of SICR.
calculations.
Multiple forward-looking scenarios
Forward looking adjustments for both The Bank determines allowance for credit
general macro-economic adjustments losses using three probability-weighted
and more targeted at portfolio / forward-looking scenarios. The Bank considers
industry levels. The methodologies both internal and external sources of
and assumptions, including any information in order to achieve an unbiased
forecasts of future economic measure of the scenarios used. The Bank
conditions, are reviewed regularly. prepares the scenarios using forecasts
generated by credible sources such as
Macroeconomic factors
Business Monitor International (BMI),
The Bank relies on a broad range of forward- International Monetary Fund (IMF), Gambia
looking information as economic inputs, such Bureau of Statistics (GBoS), World Bank and
as: GDP growth, unemployment rates, central Central Bank of The Gambia (CBG).
bank of The Gambia base rates, inflation rates
and foreign exchange rates. The inputs and The bank estimates three scenarios for each
models used for calculating expected credit risk parameter (LGD, EAD, CCF and PD) –
losses may not always capture all Normal, Upturn and Downturn, which in turn is
characteristics of the market at the date of the used in the estimation of the multiple scenario
financial statements. To reflect this, qualitative ECLs. The ‘normal case’ represents the most
adjustments or overlays may be made as likely outcome and is aligned with information
temporary adjustments using expert credit used by the Bank for other purposes such as
judgement. strategic planning and budgeting. The other
scenarios represent more optimistic and more Annual Report 2020
Guaranty Trust Bank Gambia Limited www.gtbankgambia.com 38
