Page 40 - GTBANK GAMBIA ANNUAL REPORT 2021

as temporary adjustments using expert credit scenarios represent more optimistic and more
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.
Multiple forward-looking scenarios
The Bank determines allowance for credit losses using
three probability-weighted forward-looking scenarios.
The Bank considers both internal and external sources
of information in order to achieve an unbiased measure
of the scenarios used. The Bank prepares the
scenarios using forecasts generated by credible
sources such as Business Monitor International (BMI),
International Monetary Fund (IMF), Gambia Bureau of
Statistics (GBoS), World Bank and Central Bank of The
Gambia (CBG).
The Bank estimates three scenarios for each risk
parameter (LGD, EAD, CCF and PD) – Normal, Upturn
and Downturn, which in turn is used in the estimation of
the multiple scenario ECLs. The ‘normal case’
represents the most likely outcome and is aligned with
information used by the Bank for other purposes such
as strategic planning and budgeting. The other
Annual Report 2021
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pessimistic outcomes. The Bank has identified and
documented key drivers of credit risk and credit losses
for each portfolio of financial instruments and, using an
analysis of historical data, has estimated relationships
between macro-economic variables, credit risk and
credit losses.
Assessment of significant increase in credit risk
(SICR)
At each reporting date, the Bank assesses whether
there has been a significant increase in credit risk for
exposures since initial recognition by comparing the
risk of default occurring over the remaining expected
life from the reporting date and the date of initial
recognition. The assessment considers borrower-
specific quantitative and qualitative information without
consideration of collateral, and the impact of
forwardlooking macroeconomic factors. The common
assessments for SICR on retail and non-retail portfolios
include macroeconomic outlook, management
judgement, and delinquency and monitoring. Forward
looking macroeconomic factors are a key component of
the macroeconomic outlook. The importance and
relevance of each specific macroeconomic factor
depends on the type of product, characteristics of the
financial instruments and the borrower and the
geographical region.
The Bank adopts a multi factor approach in assessing
changes in credit risk. This approach considers:
Quantitative (primary), Qualitative (secondary) and
Back stop indicators which are critical in allocating
financial assets into stages.
The quantitative models considers deterioration in the
credit rating of obligor/counterparty based on the
Bank’s internal rating system while qualitative factors
considers information such as expected forbearance,
restructuring, exposure classification by licensed credit
bureau, etc.
A backstop is typically used to ensure that in the
(unlikely) event that the primary (quantitative)
indicators do not change and there is no trigger from
the secondary (qualitative) indicators, an account that
has breached the 30 days past due criteria for SICR
and 90 days past due criteria for default is transferred
to stage 2 or stage 3 as the case may be except there
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