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| Type | Master's Thesis |
| Scope | Discipline-based scholarship |
| Title | IFRS 9 Point-in-Time Probability of Default Modelling with Focus on Mortgages and Signifi cant Increase in Credit Risk |
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| Institution | University of Zurich |
| Faculty | Faculty of Business, Economics and Informatics |
| Number of Pages | 89 |
| Date | 2019 |
| Abstract Text | The IASB introduced IFRS 9 as a direct response to the criticism that the incurred loss methods of accounting resulted in banks recognising loan losses too little, too late during the financial crisis. IFRS 9 has been adopted since 1 January 2018 and one of its central changes is the migration to an expected credit loss (ECL) approach. This paper attempts to provide a timely answer to some important questions worrying investors and regulators as a result of the standard's non-prescriptive requirements. Probability of default models required for lifetime ECL calculations under multiple economic scenarios are presented on a large dataset observing mortgages between 2000 and 2018. Criteria and thresholds for assessments of significant increase in credit risk, which inform the need for 12-month or lifetime provisioning, are discussed. By focusing on practical considerations, key challenges and some of the approaches observed in the industry, this paper also attempts to bridge a potential gap between auditors and credit risk experts. |
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