IFRS 9 · General approach

The three-stage model, without the black box

For loans, intercompany balances, debt investments and other longer-dated exposures, the general approach measures ECL according to how much credit risk has changed since the exposure was first recognised.

Who it is for

Groups with intercompany loans
Entities holding debt instruments or term deposits
Corporates financing customers or related parties
Treasury teams managing counterparty exposures

How the method works

01
Stage 1: performing
Credit risk has not increased significantly. Recognise 12-month expected credit losses.
02
Stage 2: significant increase
Credit risk has increased significantly since initial recognition. Recognise lifetime expected credit losses.
03
Stage 3: credit-impaired
There is objective evidence of impairment. Recognise lifetime losses; interest is calculated on the net carrying amount.
04
Measure
ECL = probability of default × loss given default × exposure at default, discounted at the effective interest rate and weighted across scenarios.

Stage allocation drives the measurement horizon

Stage 112-month ECL
Stage 2Lifetime ECL
Stage 3Lifetime ECL, credit-impaired

PD × LGD × EAD, discounted

What the platform automates

Staging against configurable criteria, such as days past due, rating movement or watchlist
PD, LGD and EAD assumptions with version history
Discounting and probability-weighted scenarios
Stage transfer tracking between periods

Outputs

Stage allocation by exposure
ECL by stage, with stage-transfer movement
Gross carrying amount and allowance reconciliation
Assumptions log

The three-stage model, without the black box

Who it is for

How the method works

Stage 1: performing

Stage 2: significant increase

Stage 3: credit-impaired

Measure

What the platform automates

Outputs

See the approach with sample data