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This is a consumer loan with monthly annuity payments, but there are no payments during December and January (regular payment holiday). A second borrower is added on 01.10.2018. The customer makes a partial early repayment on 02.01.2019.
Data Requirements
In order to fulfill the processing in view of regulatory reporting, the following basis data requirements were provided for this deal:
- Contractual agreement:
- For this deal, contractual deal data can be found at Consumer loan with early repayment (004-MH_LN-A-Consumer-Annuity-beEP)
- The delivered product type is "18912" (installment loan).
- Customer data:
- For this deal, a customer rating is not available since the customer is a private customer.
- The delivered customer type is "PRIVCUST" (private customer).
- Other customer information was delivered as part of customer data.
Cash Flow Plan
For this deal, a cash flow plan was generated based on contractual agreements.
Risk-Weighted Assets (RWA)
Credit Risk is measured via the amount of risk-weighted assets (RWA), which is derived in the Standardized Approach for each deal by the product of its contractual residual debt and the corresponding risk weight. The risk weight itself depends on the type of the customer, and possibly also on the rating of the customer (in case of corporate customers) as well as on the currency (in case of claims on sovereigns) and the remaining time to maturity of the deal (in case of claims on banks). When calculating amounts of RWA, effects of credit risk mitigation (CRM) are taken into account by performing an optimization of the distribution of available collateral to corresponding claims in order to reduce the RWA amount.
Due to the facts that
- this deal belongs to a private customer
- the product type is an installment loan
- this deal is not a "past due loan"
- the exposure exceeds 0.2% of the total retail portfolio
the assigned risk weight for this deal is 100% at on each posting date.
Since there is no collateral provided, the amount of RWA for this deals equals 100% of its contractual residual debt.
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In the context of ECL calculation, the deal is processed in several components/ steps.:
- Segmentation
Segmentation is performed based on the following parameterization:
- Any loan with customer type "CORPCUST" (Corporate Customer) will be assigned to segment "IFRS9CI LOAN CORPORATE".
- Any loan with customer type "SMECUST" (SME Customer) will be assigned to segment "IFRS9CI LOAN SME".
- All remaining loans will be assigned to segment "IFRS9CI LOAN RETAIL".
Hence, this loan Since this loan belongs to a private customer, it is assigned to segment “IFRS9CI LOAN RETAIL”. This means that all corresponding ECL models and configurations are applied to this deal.
- Stage Determination
For all segments except "IFRS9CI LOAN CORPORATE", "IFRS9CI GUARANTEE", "IFRS9CI MONEY MARKET" and "IFRS9CI BONDS", the stage will be assigned based on the number of days past due (DPD):
- Stage 1 for DPD <= 30 days
- Stage 2 for DPD > 30 days and DPD <= 90 days
- Stage 3 for DPD >90 days.
This deal has 0 DPD at days past due on all postings dates. Therefore, it is assigned to Stage stage 1 (HEALTHY) at on each posting date.
- probability-weighted ECL calculation
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Since this deal is assigned to stage 1, a 12-months ECL is calculated.
- Based on the derived segment “IFRS9CI LOAN RETAIL”, external PD and LGD values (expert values) were are applied.
- Theses external PD and LGD value were provided for two different economic macroeconomic scenarios:
- a "baseline" scenario (weighted by 75%)
- an "adverse" scenario (weighted by 25%)
- EAD was calculated as the sum of all future cashflows discounted with the effective interest rate.
- For each both macroeconomic scenarioscenarios, the corresponding ECL was calculated by the product of PD, LGD and EAD.
- Finally, the probability-weighted ECL is derived as the sum of 75% of the "baseline" ECL " and 25% of the "adverse" ECL.