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• Collateral during Expected Credit Loss calculation
  FlexFinance considers the collateral values allocated during
  • Expected Credit Loss calculation using statistical methods in stage 1 and 2 as well as non-significant deals assigned to stage 3
  • Expected Credit Loss calculation using individual recovery cash flows for stage 3 significant deals
  Collateral adjusts the EAD at individual deal level. 
  • For details of the calculation for stages 1 and 2, please refer to Impairment IFRS 9 Stages 1 and 2.
  • For stage 3, non-significant deals in a lump-sum specific approach, an Expected Credit Loss model needs to be defined in the Collective Impairment Workbench that calculates the Expected Credit Loss on the basis of an adjusted EAD
  • For stage 3 significant deals in a specific provision approach, collateral is a source for recovery cash flows besides other recovery types. These recovery cash flows are discounted and compared with the total exposure. 
  • For details of the calculation for stage 3, please refer to Impairment IFRS 9 Stage 3.
  The following diagram shows the risk provision for a customer for each individual deal, the outstanding amount, actual unwinding, the EIR used for discounting etc. as well as the total at customer level.
  The different scenarios lead to a probability-weighted Expected Credit Loss for stage 3 impaired significant deals.

        Figure: ECL  Expected Credit Loss calculation results at individual deal level for specific provisioning