Specific Provision

The LLFP application calculates stage-specific ECL values for all accounts, as per the IFRS 9 guidelines. According to the guidelines, it is required to calculate the 12 months ECL for accounts in Stage 1 and Lifetime ECL for accounts in Stage 2, Stage 3, and for POCI accounts. Within the specific provision method, to distinguish between these stages, the application calculates the 12 month PD and Lifetime PD, from the given PD term structures.

For accounts in Stage 1, Allowance is calculated as the product of Carrying Amount, 12 Month PD, and LGD. Also, Provision is calculated as the product of Undrawn Amount, CCF, 12 Month PD, and LGD.

For accounts in Stage 2, Stage 3, or POCI accounts, Allowance is calculated as the product of Carrying Amount, Lifetime PD, and LGD. Also, Provision is calculated as the product of the Undrawn Amount, CCF, Lifetime PD, and LGD.

The ECL is derived as the sum of Allowance and Provision.