91 SEPARATE FINANCIAL STATEMENTS 2023 Barbados Public Workers’ Co-operative Credit Union Limited Notes to the Separate Financial Statements March 31, 2023 (expressed in Barbados dollars) 63 23 Financial risk management …continued Credit risk …continued Assessment of corporate investments (term deposits) Due to limited published market data for term deposits, the Credit Union's internally developed model using published credit rating scores for similar investees and/or Moody's published statistics was used to determine the Probability of Default (PD) rates and Loss Given Default (LGD) applied in the Estimated Credit Losses (ECL) on term deposits. The Credit Union currently has $78,824,560 (2022: $43,645,290) in corporate term deposits which were assessed on an entity level. Currently, these investments are held in entities which are either regulated by the Central Bank of Barbados or Financial Services Commission as per Section 34A of the Co-operative Societies Act. Corporate term deposits and investments were staged based on the probability of default assigned to each entity. These investments were categorized as follows: Stage 1: The entity shows no decline in its ability to repay either based on past performance or future events for which a 12-month PD was assigned. The Investment Credit Rating was unchanged as at the financial year-end. Stage 2: There has been a significant event which has caused or is highly probable to have significant impact on the investee’s ability to repay for which the PD assigned was the Cumulative Probability of Default (CPD) rate less the survival period. The Investment credit rating has declined below a company rating. This is where the company or investment classification family is considered speculative and subject to substantial default risk. Stage 3: There has been a default or significant event which has caused or is highly probable to have a significant impact on the investee’s ability to repay for which the assigned PD was the CPD rate. The investment credit rating has significantly declined. The company or investment classification family is considered speculative or in poor standing and subject to very high default risk or may be in default on some part of its investment obligation. IFRS 9 provides that cost can be used as a basis for estimating fair value where there are limitations on supportable information to do otherwise. There is currently insufficient trading information from published sources to measure the fair market value of the corporate investments.
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