Page 56 - Ecobank Gambia Annual Report 2020
P. 56
Financial Statements & Annual Report
Notes to the Financial Statements
for the year ended 31 December 2020 (in Thousands of Gambian Dalasis)
The Bank analyses all data collected using statistical the services of Consultants who use external and internal
models and estimates the remaining lifetime PD of information to generate a ‘base case’ scenario of future
exposures and how these are expected to change over forecast of relevant economic variables along with a
time. The factors taken into account in this process representative range of other possible forecast scenarios.
include macro-economic data such as GDP growth, The external information used includes economic data
inflation rate, and interest rates . The Bank generates a and forecasts published by governmental bodies and
‘base case’ scenario of the future direction of relevant monetary authorities.
economic variables as well as a representative range of The Consultants applied probabilities to the forecast
other possible forecast scenarios. The Bank then uses scenarios identified. The base case scenario is the single
these forecasts, which are probability-weighted, to adjust most-likely outcome and consists of information used
its estimates of PDs. by the Group for strategic planning and budgeting. The
Loan commitments are assessed along with the Consultants has identified and documented key drivers of
category of loan the Bank is committed to provide, i.e. credit risk and credit losses for each portfolio of financial
commitments to provide mortgages are assessed using instruments and, using a statistical analysis of historical
similar criteria to mortgage loans, while commitments data, has estimated relationships between macro-
to provide a corporate loan are assessed using similar economic variables and credit risk and credit losses.
criteria to corporate loans. As a result of the impact of the Covid-19 pandemic which
Irrespective of the outcome of the above assessment, has had wide ranging impact on the global economy
the Bank presumes that the credit risk on a financial and devasted lives and livelihoods, it was imperative to
asset has increased significantly since initial recognition reassess the assumptions that underpinned the IFRS 9
when contractual payments are more than 30 days past impairment model. Consequently, Ecobank Gambia with
due unless the bank has reasonable and supportable support from the Group Risk Group reviewed and updated
information that demonstrates otherwise. some of these assumptions mainly to do with the
The Bank has monitoring procedures in place to make macroeconomic indicators which changed significantly
sure that the criteria used to identify significant increases due to economic fall-out of the Covid-19. The following
in credit are effective, meaning that significant increase changes were effected on the IFRS 9 model and a new
in credit risk is identified before the exposure is defaulted recalibrated model was used effective September 2020.
or when the asset becomes 30 days past due. The bank i) The macroeconomic variables
performs periodic back-testing of its ratings to consider ii) The scenario weights have been revised. The new
whether the drivers of credit risk that led to default were weights have a baseline weight of 40%
accurately reflected in the rating in a timely manner. iii) The macroeconomic data frequency was updated from
Incorporation of forward-looking information annual to quarterly.
Below tables shows the results which compares the
The Bank uses forward-looking information that is statistical results from the ‘New’ compared to the ‘Old’
available without undue cost or effort in its assessment model.
of significant increase of credit risk as well as in its
measurement of ECL. The Parent Company-ETI employed
Recalibrated (New) values:
Statistical Inputs GDP Growth-0 Fiscal Bal-0 Trade Bal-0 SPGSCI-3
2.13 -4.20 -17.13 507.15
Mean 4.26 2.06 4.17 121.81
Standard 1.97 1.22 0.63 0.17
Eigenvalues -0.52 0.24 -0.79 -0.23
Principal Component Score 1 0.43 -0.65 -0.32 -0.54
Principal Component Score 2
54 Ecobank Gambia Annual Report 2020 www.ecobank.com
