Page 35 - Agib Bank Limited Annual Report 2021
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assess whether the credit risk on a financial prepayment, and extension and rollover
asset has increased significantly since options.
origination, the Bank compares the risk of
default occurring over the expected life of the Definition of default
financial assets at the reporting date to the
corresponding risk of default at origination, The Bank considers a financial asset to be in
using key risk indicators that are used in the default when:
Bank’s existing risk management processes.
At each reporting date, the assessment of a it is established that due to financial or
change in credit risk will be individually non-financial reasons the borrower is
assessed for those considered individually unlikely to pay its credit obligations to
significant and at the segment level for both the Bank in full without recourse by the
corporate and retail exposures. Bank to actions such as realising
security (if any is held); or
The bank assets are moved from stage 1 to the borrower is past due 90 days or
stage 2 if: more on any material credit obligation to
the Bank.
the probability of default changes beyond
the Bank’s established threshold related In assessing whether a borrower is in default,
to the initial recognition; the Bank considers indicators that are:
an instrument is past due beyond 30 i qualitative - e.g. material breaches of
days; and covenant;
an instrument’s credit risk is considered ii quantitative - e.g. overdue status and
higher based on qualitative criteria of the non-payment on another obligation of
Bank. the same customer /customer group to
the banks; and
The instruments moved to stage 2 from stage iii based on data developed internally and
1 remain in the stage until they perform for a obtained from external sources.
sustained period as per Bank’s policy.
Inputs into the assessment of whether a
Movement from stage 2 to stage 3 are based financing exposure is in default and their
on whether the financial assets are credit significance may vary over time to reflect
impaired at the reporting date. The changes in circumstances.
determination of the credit impairment remains
unchanged in IFRS 9 consistent with IAS 39.
4.12.6 Reclassifications
Experienced credit judgement
If the business model under which the Bank
The Bank’s ECL allowance methodology
requires the use of experienced credit holds financial assets changes, the financial
judgement to incorporate the estimated impact assets affected are reclassified. The
of factors not captured in the modelled ECL classification and measurement requirements
results, in all reporting periods. related to the new category apply prospectively
When measuring ECL, the Bank considers the from the first day of the first reporting period
maximum contractual period over which the following the change in business model that
Bank is exposed to credit risk. All contractual results in reclassifying the Bank’s financial
terms are considered when determining the assets.
expected life, including prepayment options
and extension and rollover options. During the current financial year and previous
accounting period there was no change in the
business model under which the Bank holds
Expected life financial assets and therefore no
reclassifications were made.
When measuring expected credit loss, the Annual Report and IFRS Financial Statements
Bank considers the maximum contractual
period over which the Bank is exposed to credit 4.12.7 Modification and derecognition of
risk. All contractual terms are considered when financial assets
determining the expected life, including
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