NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2023 277 OUR SUSTAINABILITY APPROACH HOW WE ARE GOVERNED FINANCIAL STATEMENTS SHAREHOLDERS’ INFORMATION ADDITIONAL INFORMATION 51. FINANCIAL RISK MANAGEMENT (CONT’D.) (a) Credit risk (cont’d.) Impairment assessment (cont’d.) General approach - Stage 1 covers financial instruments that have not deteriorated significantly in credit quality since initial recognition or (where the optional low credit risk simplification is applied) that have low credit risk. - Stage 2 covers financial instruments that have deteriorated significantly in credit quality since initial recognition (unless the low credit risk simplification has been applied and is relevant) but that do not have objective evidence of a credit loss event. - Stage 3 covers financial instruments that have objective evidence of impairment at the reporting date. Low Credit Risk The Group and the Bank shall adopt practical expedients for its applicable portfolios as detailed in the table below: Practical Expedient Low Credit Risk Applicable portfolio Government and quasi-government bonds, commercial paper, interbank deposit placement/lending. Criteria • the financial instrument has a low risk of default; • the borrower has a strong capacity to meet its contractual cash flow obligations in the near term; and • adverse changes in economic and business conditions in the longer term may, but will not necessarily, reduce the ability of the borrower to fulfill its contractual cash flow obligations. Measurement 12-month ECL Methodology PD x LGD x EAD formula Definition of 12-month ECL 12-month ECL are a portion of the lifetime ECLs that represent the ECLs that resulting from probable default events on a financial instrument occurring in the next 12 months. They are weighted by the probability of such a default occurring.
RkJQdWJsaXNoZXIy NDgzMzc=