CM-1.8.15

A Stage 3 exposure can be moved to Stage 2 or Stage 1 when all the following criteria are met simultaneously:

CM-1.8.15A

Stage 2 exposures can be moved to Stage 1 after the cooling-off period, specified in Appendix CM-6, has passed and the counterparty’s financial situation indicates it to be equivalent to that of a ‘very low credit risk’ exposure.

CM-1.8.16

Conventional bank licensee must clearly articulate and document policies in respect of the counting of days past due, in particular in respect of the re-ageing of the facilities and the granting of extensions, deferrals, renewals and rewrites to existing accounts. At a minimum, the re-ageing policy must include:

CM-1.8.17

For the purpose of CM-1.8.16, re-aging occurs when the licensee changes the tenor or due dates of the credit when rescheduling or restructuring a facility.

CM-1.8.18

Non-performing exposures in the following situations must not be re-categorised as performing without meeting the conditions set forth in CM-1.8.15:

The re-categorisation of a non-performing exposure as performing must be made on the same level (i.e. obligor or transaction approach) as when the exposure was originally categorised as non-performing.

CM-1.8.18A

Non-performing POCI exposures may be re-categorised as performing subject to meeting the conditions stipulated in Paragraphs CM-1.8.15 to CM-1.8.18.

CM-1.8.19

Conventional bank licensees must have the necessary tools to ensure a robust estimate and timely recognition of ECL. Information on historical loss experience or the impact of current conditions may not fully reflect the credit risk in lending exposures. In this context, the licensee must use its experienced credit judgment to thoroughly incorporate the expected impact of all reasonable and supportable forward-looking information, including macroeconomic factors, on its estimate of ECL. The licensee’s use of its experienced credit judgment must be documented in the licensee’s credit risk methodology and subject to appropriate oversight.

CM-1.8.20

Applying the concepts of ECL could vary for each licensee depending on its underwriting criteria, loss history, terms of collateral and a number of other variables, both entity-specific and external. Reasonable and supportable information will not present itself, but would rather require management to determine what is relevant and practical, without undue costs or efforts, to actively gather, analyse and process to make required credit risk assessments to support the ECL process. Licensees will need to adopt an appropriate risk assessment methodology which is commensurate with the size, complexity, structure, economic significance and risk profile of their portfolio. This means that, in general, the larger and more complex a portfolio or institution, the more its risk infrastructure should capture relevant and reliable information and trends that would support the development of a sophisticated approach to determine a risk based ECL. Conversely, for smaller and simpler portfolios or institutions, a less sophisticated approach may be adopted to align with the risk management infrastructure and processes within the licensee.

CM-1.8.21

Regardless of the size of the licensee or prominence of the portfolio, the approach adopted by the licensee should comply with the specific requirements of this section and applicable accounting standards. It is not necessary that every licensee or every portfolio within the bank would apply the same level of sophistication. However, licensees will need to periodically assess whether their approach continues to be appropriate and relevant in light of changing circumstances with the aim of improving its level of estimation over time.