95 CONSOLIDATED FINANCIAL STATEMENTS 2023 Barbados Public Workers’ Co-operative Credit Union Limited Notes to the Consolidated Financial Statements March 31, 2023 (expressed in Barbados dollars) 63 25 Financial Risk Management …continued 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. The Group’s ECL methodology, model inputs, significant increase in credit risk (SICR) thresholds, and definition of default remain consistent with those used as at March 31, 2022. Forward-looking information, scenarios and associated weightings, were revised to reflect uncertainty as it relates to current economic conditions and forecast for the next twelve months. The Group’s models are calibrated to consider past performance and macroeconomic forward-looking variables as inputs. Expert credit judgement is applied to consider the exceptional circumstances this period, including consideration of government assistance programs, in the assessment of underlying credit deterioration and migration of balances to progressive stages. Consistent with requirements of IFRS 9, the Group considered both quantitative and qualitative information in the assessment of significant increase in risk. First time utilization of a payment deferral program was not considered an immediate trigger, in keeping with IASB and regulatory guidance, for an account to migrate to a progressive stage, given the purpose of these programs is to provide temporary cashflow relief to the Group’s customers. Modifications The terms and conditions related to the payment deferrals were assessed to determine if they represented substantial modifications. Where required modification gains or losses have been recognized.
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