Page 131 - RB GRENADA ANNUAL REPORT 2025_ONLINE

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Notes to the Financial Statements

For the year ended September 30, 2025. Expressed in Thousands of Eastern Caribbean dollars ($’000), except where otherwise stated.

18 Risk management (continued)
18.2 Credit risk (continued)
18.2.4 The Bank’s internal rating and PD estimation process

Financial guarantees, letters of credit and undrawn loan commitments
The Bank issues financial guarantees, letters of credit and loan commitments.

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

18.2.5 Significant increase in credit risk
The Bank 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 Bank assesses whether there has been a significant
increase in credit risk since initial recognition.

The Bank also applies a secondary qualitative method for triggering a significant increase in credit risk for an asset.
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 18.2.6), the Bank
applies the same principles for assessing whether there has been a significant increase in credit risk since initial
recognition.

18.2.6 Grouping financial assets measured on a collective basis
As explained in Note 2.5 (g) (i) dependent on the factors below, the Bank calculates ECLs either on a collective or
an individual basis. Asset classes where the Bank 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 Bank calculates ECL on a collective basis include:
• The retail overdraft portfolio
• Past due not yet relegated credit facilities