91 BARBADOS PUBLIC WORKERS’ CO-OPERATIVE CREDIT UNION LIMITED | CONSOLIDATED ANNUAL REPORT 2021 BARBADOS PUBLIC WORKERS’ CO-OPERATIVE CREDIT UNION LIMITED Notes to the Consolidated Financial Statements For the year ended March 31, 2021 (Expressed in Barbados dollars) 65 25. Financial Risk Management, continued 25.1 Introduction, continued Impact of COVID-19, continued COVID-19, continued Measures that the Group continues to employ include measures to assist customers during this crisis, such as: • Loan moratoriums - It is not expected that there will be reclassification of loans from Stage 1 to Stage 2, as these payment moratoriums should not trigger a significant increase in the credit risk (SICR) unless other criteria indicating SICR are identified. • Special payment arrangements such as payment plan solutions and debt restructuring, based on approval by the Credit Committee and the Board. 25.2 Credit risk Credit risk is the risk that the Group will incur a loss because its customers or counterparties fail to discharge their contractual obligations. The Group manages and controls credit risk by setting limits on the amount of risk it is willing to accept for individual counterparties and by monitoring exposures in relation to such limits. Credit risk exposures arise principally in lending activities that lead to loans and advances, and investment activities that bring debt securities into the Group’s asset portfolio. There is also credit risk in off-balance sheet financial instruments, such as commitments. COVID-19 The COVID-19 pandemic’s significant impact to the economy and the different stages of lockdown and re-opening, resulted in continued uncertainty on timing of recovery. This required additional considerations to determine the allowance for credit losses this year. In response to the pandemic, and based on regulatory support, during the period the Group introduced a support mechanism for customers impacted by COVID-19, including the deferral of payments for an initial period of six months. The option to extend for an additional twelve months is available to all customers who still display challenges in meeting their loan commitments. Special payment arrangements such as payment plan solutions and debt restructuring, based on approval by the Credit Committee and the Board was also offered to customers. The ECL methodology, model inputs, significant increase in credit risk (SICR) thresholds, and definition of default remain consistent with those used as at March 31, 2020. Forward-looking information, scenarios and associated weightings, were revised to reflect the unprecedented impact of the COVID-19 pandemic, and the resulting significant uncertainty as it relates to current conditions and outlook.
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