Master IFRS 9 ECL Modeling

The definitive resource for expected credit loss calculation. From regulatory theory to practical implementation.

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3 Stages

Impairment Model

5 Tools

Interactive Calcs

Validation

Backtesting Suite

Code Ready

JS & Python

The ECL Engine

End-to-end calculation pipeline visualized

Data Ingestion

Load loan-level data & macro indicators

DQ Check

Validate integrity & consistency

Segmentation

Group homogeneous portfolios

Staging

Assess significant risk increase

Calculation

Compute PD × LGD × EAD

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IFRS 9 at a Glance

Understanding the three-stage impairment model

Stage 1

Performing

12-Month ECL
Loans with no significant increase in credit risk. Provision for defaults within 12 months.

Stage 2

Underperforming

Lifetime ECL
Significant increase in credit risk (SICR). Full lifetime expected losses recognized.

Stage 3

Non-Performing

Lifetime ECL
Credit-impaired loans. Interest revenue calculated on net carrying amount.

The ECL Formula

Expected Credit Loss is calculated as the product of three key risk parameters, discounted for the time value of money.

ECL = PD × LGD × EAD × DF
Probability of Default (PD)
Likelihood of default over time horizon
Loss Given Default (LGD)
Percentage loss if default occurs
Exposure at Default (EAD)
Outstanding balance at time of default
Quick Calculation
Exposure (EAD) $100,000
Prob. Default (PD) 2.0%
Loss Given Default (LGD) 45.0%
Discount Factor 0.95
Expected Credit Loss $855
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Structured Learning Path

Follow our step-by-step guide to mastery

1
Introduction & Basics
Regulatory background & transition
2
Data Requirements
Data preparation & quality
3
Staging Logic
SICR assessment rules
4
ECL Calculation
Math behind the model
5
Validation & Backtesting
Statistical testing & calibration
6
Reporting
Disclosure requirements