Management of Banking and Financial Services, 4th Edition by Pearson

capital—risk, regulation and adequacy n 427

TABLE 11.9 CALCULATION OF 12 MONTH AND LIFETIME ECL AT BEGINNING OF YEAR L - WITH DISCOUNTING

Year 1 2 3 ECL

PD 0.10% 0.15% 0.20% A

Cumulative PD 0.10% 0.25% 045%

Probability of survival (end of year) 99.90% 99.75% 99.55%

Probability of prior year survival 100.00% 99.90% 99.75% B

LGD 50% 50% 50% C

Effective interest rate 10% 10% 10%

Discount factor 91% 83% 75% D

Balance outstanding, end of year 110 110 110 E

12 Month ECL 0.0550 0.0550 F=A×C×E

Period credit loss 0.0550 0.0824 0.1097 0.2471 G=A×B×C×E

PV of period credit loss & Lifetime

ECL

0.0550 0.0681 0 0824 0.2056 H=G×D

Source: Presentation by PwC, December 2015, ...