Optimum stage-to-stage transition

The transfer from stage 1 to stage 2 under IFRS 9, which is extremely important for the risk provision amount, usually leads to an increase in the risk provision. This so-called 'cliff effect' is caused by the change from a 12-month PD in stage 1 to a multi-year PD in stage 2 when the risk provision is calculated. In contrast to IAS 39, there is no 'Loss Identification Period", in which the PD in question had a proportionate 'cushioning effect' on the risk provision.

Therefore the implementation of processes that reliably identify a significant deterioration in credit quality is more important than ever. In addition to absolute parameters related to a due date, such as the number of days in default or the current rating of a counterparty, the solution also allows relative attributes, which refer to the changes within a certain period, to be used. It is also possible to compare current values with those values that were considered on initial recognition. In this way, a transfer to stage 2 is prevented, which otherwise would have been necessary due to the absolute value that an attribute has currently attained and although the credit rating of a counterparty has deteriorated only marginally over the course of time.