Page 158 - RFHL ANNUAL REPORT 2024_ONLINE

156 Notes to the Consolidated Financial Statements

For the Year Ended September 30, 2024.
Expressed in millions of Trinidad and Tobago dollars, except where otherwise stated.

22. Risk management (continued)
22.2 Credit risk (continued)
22.2.4 The Group’s internal rating and PD estimation process (continued)
Financial guarantees, letters of credit and undrawn loan commitments (continued)

Financial guarantees, letters of credit and undrawn loan commitments are off-balance sheet instruments and
have no history of default. As a result, the Group considers the risk of default to be very low and the ECLs on these
instruments were determined to be zero.

22.2.5 Significant increase in credit risk
The Group continuously monitors all assets subject to ECLs. In order to determine whether an instrument or a
portfolio of instruments is subject to 12mECL or LTECL, the Group assesses whether there has been a significant
increase in credit risk since initial recognition.

The Group also applies a secondary qualitative method for triggering a significant increase in credit risk for an
asset, such as moving a customer/facility to a watch list. Regardless of the change in credit grades, if contractual
payments are more than 30 days past due, the credit risk is deemed to have increased significantly since initial
recognition.

When estimating ECLs on a collective basis for a group of similar assets (as set out in Note 22.2.6), the Group
applies the same principles for assessing whether there has been a significant increase in credit risk since initial
recognition.

22.2.6 Grouping financial assets measured on a collective basis
As explained in Note 2.6g (i) dependent on the factors below, the Group calculates ECLs either on a collective or
an individual basis.

Asset classes where the Group calculates ECL on an individual basis include:
• All Stage 3 assets, regardless of the class of financial assets
• The commercial and corporate lending and overdraft portfolio
• The mortgage portfolio
• The retail lending portfolio
• The credit card portfolio

Asset classes where the Group calculates ECL on a collective basis include:
• The retail overdraft portfolio
• Subsidiaries with small, homogeneous retail portfolios
• Past due not yet relegated credit facilities

22.2.7 Analysis of gross carrying amount and corresponding ECLs are as follows:
Advances

2024 2023
% %

Stage 1 89.5 87.6
Stage 2 5.7 7.1
Stage 3 4.8 5.3

100.0 100.0