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- Period of exposure that limits the period over which possible defaults are considered and thus affects the determination of other components in the calculation of ECLs.
- Exposure at Default that is linked to the question of how loan exposures are expected to change over time. This value is crucial for an unbiased measurement of ECLs.
In addition, the calculation of exposure at default can be split into two sub-groups:
- Exposure for on-balance financial assets, for example loans, money market or other debt instruments. For on-balance items, the contractual payment schedule, the payment behaviour such as early repayment or prolongation will have an impact on the exposure for different periods.
- Exposure for off-balance financial assets including the undrawn portion of revolving credits and commitment. For an off-balance item, the credit conversion factor has a significant impact on the estimated exposure at default.
The following components are provided for on-balance sheet items as well as for a simplified approach. Components for off-balance sheet items and more complex requirements are available on request.
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On the basis of the cash flow plan, the EAD for different periods in the future is calculated using the amortised cost and the adjustment of 3 - months overdue which may occur before default.
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