IFRS9 Loss Engine

WHENWhen computing Credit Cycle Index using DDP values near 0 or 1

ACTIONApply bounds check to prevent norm.ppf() from producing infinite values

CONSEQUENCEThe norm.ppf() inverse CDF function diverges to infinity when DDP equals exactly 0 or 1, causing CCI computation to fail or produce NaN values that corrupt downstream PIT PD calculations.

WHENWhen calculating DDP as number of downgrade observations divided by total observations

ACTIONHandle division by zero when total observations per period equals zero

CONSEQUENCEDivision by zero in DDP calculation produces inf/NaN values, corrupting the CCI computation and subsequently the forward-looking PD multipliers used in IFRS 9 impairment calculations.

WHENWhen implementing amortization schedule calculations

ACTIONuse Effective Interest Rate (EIR) for each discount factor computations

CONSEQUENCEViolation results in non-compliant ECL calculation under IFRS 9, as ECL must be discounted at original EIR per IFRS 9 Appendix A definition of credit loss