105 CONSOLIDATED FINANCIAL STATEMENTS 2024 Barbados Public Workers’ Co-operative Credit Union Limited Notes to the Consolidated Financial Statements March 31, 2024 (expressed in Barbados dollars) 65 25 Financial Risk Management …continued 25.2 Credit risk …continued The following table illustrates the impact of staging on our ECL by comparing our allowance if all performing loans were in Stage 1, to the actual ECL recorded on these. As at March 31, 2024 Performing loans ($’000) As at March 31, 2023 Performing loans ($’000) ECL - all performing loans to Stage 1 2,256 2,266 Impact of staging 463 1,957 Stage 1 and 2 ECL 2,719 4,223 Adjustments to ECL have been considered to moderate the impact of dramatic swings in economic input variables or their lagging impact on credit losses. Judgment has been required in the development and application of these overlays. Management relies on the prediction of key reputable authorities with expertise in the area. While the Barbados economy is projected to experience 4% to 5% growth in 2024, the impact of other world economies upon its tourism product and related industries remains highly uncertain. Consequently, the assumptions used to determine our allowances have a higher-than-usual degree of uncertainty. The inputs used in the calculation of the allowance are inherently subject to change, which may materially impact our estimate of the allowance for expected credit losses. The Group’s stage 1 and 2 allowance for credit losses on the loan portfolios as at March 31, 2024 reflects a decrease as a result of the recent recovery observed in many economies and the resilience of our portfolio. The IFRS 9 model could not solely be used to determine expected credit losses as it was not designed with events of this magnitude in mind. As a consequence, a model overlay was used to account for incremental expected losses not captured by the IFRS 9 model. To address the uncertainties inherent in the current environment and to reflect all relevant risk factors not captured in our model, we applied expert credit judgement in the design of the overlay and the determination of inputs used in the calculation of the allowance in light of the significant uncertainty, the impact of expert credit judgement on our allowances during 2023 - 2024 increased as compared to 2022 - 2023. We applied qualitative adjustments to macroeconomic projections, the assumed credit response of the portfolio to the macroeconomic conditions, levels of loss severity and the determination of significant increase in credit risk. Key inputs and assumptions The measurement of expected credit losses is a complex calculation that involves a large number of inputs and assumptions. The key drivers of changes in expected losses include the following: • Forward looking macroeconomic projections; • Recent portfolio performance; • Scenario design and the weighs associated with each scenario; and • Transfers between stages, which can result from changes in any of the above inputs.
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