We continue on our IFRS9 disclosures quest! Part 2 had us doing some heavy data munging, followed by modeling to estimate an ECL balance. In this post we will massage the dataset from part 2 and prepare the report we specified in the first post. This report sets out an opening to closing balance of the loan and expected credit loss balances, and also details transfers between risk stages.
This post is a continuation of the series initiated here. Recall our problem imagines we are a bank lending to the largest 1,000 US companies. We (“Bank1000”) own the debt of these companies and are required to prepare IFRS9 disclosures. This requires the estimation of an expected credit loss (“ECL”) and risk stage. We have already selected the top 1,000 stocks for analysis, we now need to create an ECL balance and assign a risk stage.
This series of posts will deal with the preparation of International Financial Reporting Standard 9 - Financial Instruments (“IFRS9”) disclosures for a bank. In particular, the reconciliation tables that are required to account for movements in loan balances and expected credit losses over a reporting period. This is a somewhat arcane topic. Why do we want to do this? IFRS9 is a relatively new accounting standard and the reconciliation tables disclose a flow of loan balances over time, accounting for draw downs, repayments and other cash flows.