Training Course: IFRS 9 – Expected Credit Loss (ECL) Modeling

Introduction

The adoption of IFRS 9 has revolutionized how financial institutions approach credit loss provisioning through the Expected Credit Loss (ECL) model. This forward-looking model is a critical component in expected credit loss accounting, requiring an in-depth understanding of ECL principles, methodologies, and regulatory compliance. This comprehensive training course is designed to equip participants with the skills and knowledge necessary to apply ECL modeling, implement it effectively, and ensure adherence to IFRS 9 standards. Through practical application and real-world financial instruments, participants will bridge the gap between theoretical concepts and industry practice.

Course Objectives

By the end of this course, participants will be able to:

• Understand the key principles and framework of IFRS 9, with a strong emphasis on the Expected Credit Loss (ECL) model.
• Apply methodologies for calculating ECL, including Probability of Default (PD), Loss Given Default (LGD), and Exposure at Default (EAD).
• Develop and validate ECL models that align with IFRS 9 requirements and industry best practices.
• Interpret and analyze ECL outcomes for accurate financial reporting and strategic decision-making.
• Ensure compliance with regulatory expectations and internal audit standards, mitigating risks of non-compliance.

Course Outlines

Day 1: Foundations of IFRS 9 and Credit Risk

• Overview of IFRS 9 and its impact on financial institutions.
• Comparison with IAS 39: Key differences and improvements.
• Classification and measurement of financial instruments under IFRS 9.
• Introduction to credit risk and impairment requirements.
• Understanding the Expected Credit Loss (ECL) definition and the rationale for a forward-looking model.
• Staging criteria: 12-month ECL vs. Lifetime ECL.

Day 2: ECL Components and Modeling Basics

• Core components of ECL: PD, LGD, and EAD.
• Approaches to modeling Probability of Default (PD).
• Techniques for estimating Loss Given Default (LGD).
• Exposure at Default (EAD) modeling methodologies.
• Data sourcing and assessing data quality for effective modeling.

Day 3: ECL Calculation and Implementation

• Understanding the ECL formula and the scenario-weighted approach.
• Discounting of expected cash flows and incorporating the time value of money.
• Integrating macroeconomic variables and forward-looking information.
• Model validation, calibration, and back-testing for accuracy.
• Incorporating overlays and expert judgment in ECL calculations.

Day 4: Practical Applications and Case Studies

• Segmenting portfolios for ECL modeling: Retail vs. Corporate exposures.
• Real-world application: Developing an end-to-end ECL model.
• Hands-on ECL model building using Excel or Python for practical exposure.
• Reviewing financial disclosures and audit trails for transparency.

Day 5: Governance, Challenges, and Regulatory Expectations

• Best practices for model governance and documentation.
• Addressing model risk and handling validation findings.
• Key audit considerations and the role of internal controls.
• Regulatory expectations, including Basel, ECB, and IFRS IC guidelines.
• Wrap-up session: Lessons learned and the future of ECL modeling.

Why Attend this Course: Wins & Losses!

• Master IFRS 9 Compliance: Understand the critical principles of IFRS 9 and how it transforms credit risk assessment through the Expected Credit Loss (ECL) model.
• Develop Practical Skills: Gain hands-on experience in building and validating ECL models, applying them to real-world scenarios using Excel and Python.
• Enhance Decision-Making: Learn to interpret ECL outcomes for better financial reporting and risk assessment.
• Achieve Regulatory Compliance: Ensure alignment with IFRS 9, Basel III, and other international standards to minimize regulatory risks.
• Boost Career Opportunities: Equip yourself with in-demand skills in credit risk management, expected credit loss accounting, and financial modeling.

Conclusion

By the end of this course, participants will have a solid grasp of the IFRS 9 framework and the capabilities to apply ECL modeling with confidence. This course empowers professionals to design, validate, and implement ECL models, ensuring robust compliance with IFRS 9 standards. Participants will be prepared to enhance their organization's credit risk management processes, contribute to accurate financial reporting, and navigate the complexities of expected credit loss (ECL) accounting.

Whether you are part of a financial institution, an auditing firm, or a regulatory body, this training will equip you with the tools and expertise to excel in the evolving landscape of credit risk assessment under IFRS 9.