How do banks select macroeconomic drivers in IFRS 9 models?
Banks are required to estimate credit risk in a forward-looking manner, particularly under the IFRS 9 regulatory framework. A key component of this process is the calculation of Expected Credit Losses, where default probabilities need to reflect current and expected economic conditions rather than long-term averages. In practice, this requires a transition from Through-the-Cycle probabilities […]
