Credit Risk | ECL

Conceptual Case Study | IFRS 9 | Credit Risk Analytics

Disclaimer: This project presents a conceptual overview based on professional experience. All descriptions are generalized and do not include proprietary data, internal models, or confidential company information.

Project Overview

This section outlines a conceptual approach to Expected Credit Loss (ECL) and credit risk analysis aligned with IFRS 9 principles. The methodology reflects hands-on exposure to credit portfolio monitoring, risk segmentation, and risk-based decision support in a financial services environment.

Credit Risk Assessment Framework

  • Customer credit behavior and repayment patterns
  • Loan product and exposure characteristics
  • Historical delinquency and default trends
  • Forward-looking macroeconomic risk indicators

ECL Modeling Approach (IFRS 9)

Stage 1 – Performing Assets

  • 12-month Expected Credit Loss calculation
  • Low credit risk exposure
  • Continuous monitoring using early warning indicators

Stage 2 – Underperforming Assets

  • Lifetime Expected Credit Loss estimation
  • Significant Increase in Credit Risk (SICR)
  • Migration analysis based on delinquency behavior

Stage 3 – Credit-Impaired Assets

  • Lifetime ECL with default recognition
  • Higher probability of default and loss severity
  • Focus on recovery and collateral effectiveness

Key ECL Components

  • Probability of Default (PD): Likelihood of borrower default
  • Loss Given Default (LGD): Estimated loss after recoveries
  • Exposure at Default (EAD): Outstanding exposure at default

ECL = PD × LGD × EAD

Analytical Techniques Applied

  • Portfolio segmentation based on risk characteristics
  • Delinquency and migration trend analysis
  • Risk categorization (Low / Medium / High)
  • Sensitivity analysis using macroeconomic scenarios

Business Impact & Risk Insights

  • Early identification of high-risk customer segments
  • Support for risk-based provisioning and capital planning
  • Improved monitoring of credit quality deterioration
  • Enhanced risk mitigation and policy decision support

Tools & Skills Applied

  • Excel-based ECL models and automated MIS reporting
  • Dashboard-driven credit risk monitoring
  • Data analysis for portfolio-level insights