Banks across the globe saw a rise in increased credit risk exposures (stage 2 assets) and in expected credit losses as the COVID-19 pandemic wore on. This uptick in stage 2 proportions indicates a perceived drop in borrower resilience, according to a recent report by the European Banking Authority. And as pandemic-related measures such as moratoria on loan repayments expire, asset quality is likely to be affected.
To read the article, see “IFRS 9 models in financial instruments and impairment regulations: The new reality and lessons learned,” May 23, 2022.