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Lenders now have to comply with new accounting rules for expected credit losses, are you ready?

Effective for reporting periods beginning on or after 1 January 2018, lenders complying with International Financial Reporting Standards need to adopt a new model for the early recognition of losses for certain debt instruments. For lenders with large loan books, the complexity of this new framework presents a great challenge in finding or building a reliable and auditable system that can be integrated into their accounting system. Provision for credit losses is now more forward looking, leading to more timely recognition while the “incurred loss” framework that preceded the new framework required banks to recognise credit losses only when evidence of such loss was clear.

 
Why is this a big headache for lenders?

Applying the new model is a very challenging task. A broad range of factors that affect the credit risk of a loan need to be taken into consideration, including factors attributed to the type of loan, geographical location of the borrower, the borrower’s industry and other client specific behavioural risk factors. All of these factors, together with forecasts of the economic environment have to be applied to massive data sets to produce a report for expected credit losses, for each record of each loan payplan.

 
The Singular IFRS 9 solution.

Singular Systems have collaborated with their clients to develop a global IFRS 9 Expected Credit Loss Provision software platform. The software accepts loan management data from the lender’s loan management system and may be integrated into their core accounting system. Having done extensive investigation, collaboration and consulting with industry professionals, Singular provides lenders with a product ready for implementation and the opportunity to leverage a world class and extensively tested solution. In line with Singular Systems’ product development methodology, the software can be customised to accommodate different clients’ needs.

IFRS 9 PROCESSES

Expected Credit Loss Provision

Loan Management System Integration

Facilitates a seamless integration between your loan management system and the IFRS 9 module which ensures data integrity across clients, collateral and loan payplans.

Expected Credit Loss Modelling

A complex algorithm that consumes a number of dynamic factors to compute the Loss Given Default (LGD) and uses these results to arrive at a range of Probability of Defaults (PB) which are the basis for the Weighted Average provision calculation.

Walk Forward Calculations

These calculations can be performed between any two reporting periods to provide full auditablility.

Slice and Dice your Data

An advanced web reporting framework that gives users access to their real-time data and allows them to slice and dice the data to gain valuable insight.

Are you IFRS 9 compliant?