112 BARBADOS PUBLIC WORKERS’ CO-OPERATIVE CREDIT UNION LIMITED Barbados Public Workers’ Co-operative Credit Union Limited Notes to the Consolidated Financial Statements March 31, 2025 (expressed in Barbados dollars) 74 25 Financial Risk Management …continued 25.2 Credit risk …continued Assessment of Amortised Cost Fixed Income Securities Sovereign debt securities - Government of Barbados On December 12, 2023, the Credit Union invested $10,000,000 in GOB BOSS Bonds Plus 2028 with a coupon rate of 4.5% and carried at amortised cost. The associated ECL was $40,121 as at March 31, 2025 (2024: $37,460). Assessment of Corporate debt securities As at March 31, 2025, the Credit Union held corporate debt securities with the Barbados Port Inc. (BPI) with a carrying value of $8,000,000 (2024: $5,159,737) with an average weighted effective yield of 5.71% (2024: 4.47%). An ECL assessment was performed as required by IFRS 9. This assessment on the Credit Union’s debt securities measured at amortised cost utilized the following methodology as outlined below: • Due to the lack of published statistical data and the lack of an active market for securities, Moody’s Investor’s Report dated April 11,2024 on Sovereign default and recovery rates, 1983 to 2023 was used to provide the cumulative default rates (CDR) for categories of bonds similar to Barbados. This gave the cumulative probability of default over a 10-year period. • The recovery rate of 89% (2024 - 89%) for the Barbados Port Inc. bonds were used since these securities were not part of the debt exchange and had a higher likelihood of repayment due to the corporate independence, financial stability and profitability of the Barbados Port Inc. The loss given default (LGD) was therefore 18.03% which included a country default spread risk premium of 6.44 % (2024 - 7.08%). • The discount rate applied was the effective interest rate for amortised cost financial instruments. The staging methodology which was applied to term deposit was also applied to the corporate debt securities. The above assumptions were the best-case scenario for the Groups’ securities that are backed by the most reasonable and supportable data available at the time of the assessment.
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