107 CONSOLIDATED FINANCIAL STATEMENTS 2026 Barbados Public Workers’ Co-operative Credit Union Limited Notes to the Consolidated Financial Statements March 31, 2026 (expressed in Barbados dollars) 75 24 Financial Risk Management …continued 24.2 Credit risk …continued Sovereign debt securities - Government of Barbados …continued Assessment of Corporate debt securities …continued Similar to the ECL assessment for term deposits, the staging methodology is as follows: Debt securities measured at amortised cost were assessed for credit risk based on the credit quality of the issuers, including consideration of whether issuers were classified as investment grade or non-investment grade. Staging was determined by comparing the probability of default (PD) assigned at initial recognition with the PD at the financial reporting date. A moderate deterioration in issuer credit quality, including migration within investment grade or a downgrade to non-investment grade, would result in classification in Stage 2. A significant deterioration in credit quality, including credit impaired or defaulted issuers, would result in classification in Stage 3, in accordance with the IFRS 9 expected credit loss model. The above assumptions were the best-case scenario for the Credit Union’s securities that are backed by the most reasonable and supportable data available at the time of the assessment. Key data sources, as outlined in the expected credit loss assessment methodology, were obtained from Moody’s, a global credit rating agency that provided published statistics and data on corporate and sovereign bonds and Corporate investments. The expected credit losses computed were $98,715 (2025 - 174,116) as at March 31, 2026 (Note 12). Incorporation of Forward-Looking Information Assessment In measuring expected credit losses (ECL) in accordance with IFRS 9, the Credit Union incorporates reasonable and supportable forward looking information that is available without undue cost or effort. Forward looking information is used to assess changes in credit risk and to support the estimation of expected credit losses over the life of financial assets. The Credit Union applies a structured, forward looking scorecard that combines external macroeconomic indicators and internal, exposure specific credit indicators to support a consistent, transparent, and well governed assessment of credit risk. The framework assigns a 40% weighting to external indicators and a 60% weighting to internal indicators, reflecting management’s assessment that internal financial performance and credit quality metrics are the primary drivers of default risk, while macroeconomic conditions provide important contextual insight.
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