[shemenaks]

I tried answering Q4 because Q3 is difficult for me (except the level disclosure).

Cant really remember the questions. For the principle i wrote something like providing a future expected credit loss so that entities would have sufficient buffer to protect themselves in the event of adverse market conditions.

I wrote the 3 stage general approach in which stage 1 refers to performing assets and not credit impaired upon origination. 12mths ECL to be provided at this stage. Stage 2 relates to significant deterioration in credit quality, to provide lifetime ECL. Stage 3 to is the impaired assets, lifetime ECL as well as to adjust the revenue recognition using a credit adjusted EIR.

Simplified approach allows entities to adopt a simpler method. This is by providing a lifetime ECL, eliminates the monitoring of credit quality. But the requirement is that the assets does not have a significant financing component and is not more than 12 mths.

Method for significant deterioration include change in price, credit spread, internal/external ratings, cross-defaults, mia/dpd.

Securitize loan. Originate at stage 1. Then transfer to stage 2. There was increase in credit risk due to market conditions affecting the repayment capability. Loan ratio to collateral also increased. The borrower also no longer deemed as low credit risk. But provision amount could be zero due to LGD portion(property value-collateral coverage against loan)

Clean loan. Originate stage 1(not credit impaired upon origination). Then remained at stage 1 as there is no change in pd rate. 12months ECL would be the 20% of gross loan expected loss if the loan defaults, as assumed no ammortisation and ignore time value of money. Nothing to do about the approx of lifetime pd(this is just to help if you think the loan significantly deteriorated).

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