Sizing the Stage 2 Portfolio for IFRS 9 Provisions

8 Pages Posted: 14 May 2015 Last revised: 21 Oct 2016

Date Written: February 15, 2016

Abstract

IFRS 9 norms require classifying non-defaulted loans into two stages depending on their credit quality evolution since initial recognition by the bank. In this paper, we propose an optimal way to perform this classification. Target values of some key performance indicators of the provisioning model emerge from the implementation of this process. In particular we compute the target value of the stage 2 "Hit Rate" and the size of the stage 2 portfolio.

Keywords: provisions, collective provisions, IFRS 9, loan portfolio, credit risk, scoring model

JEL Classification: C10, C60, M40, M41, M47

Suggested Citation

Brunel, Vivien, Sizing the Stage 2 Portfolio for IFRS 9 Provisions (February 15, 2016). Available at SSRN: https://ssrn.com/abstract=2606080 or http://dx.doi.org/10.2139/ssrn.2606080

Vivien Brunel (Contact Author)

Société Générale ( email )

Paris-La Défense, Paris 92987
France

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