Page 112 - CCB_Full-Annual-Report-2021

112 Notes to the Financial Statements 113

Write-off The majority of slot 1 to 3 accounts relate to IFRS9 Definition Provisioning Cure Criteria
performing loans where the loans are fully up to Stage Basis
A write-off is a direct reduction in a financial assets Contents
gross carrying value when there is no reasonable date and no significant change in credit risk has Stage 1 – All performing loans which do 12m N/A
expectation of recovering the financial asset in its been identified. not feature on the watchlist. Expected
Contents
entirety or a portion thereof. A write off therefore Credit
constitutes a derecognition event. The Bank has The majority of slot 4 loans are in stage 2 as a result – Loans which have no Losses
experienced a total of 20 write offs on its REF of accounts falling into arrears or other deteriorating arrears on them.
portfolio and 12 write offs on its AF portfolio since credit factors having been identified, and the Stage 2 – The customer is at least Lifetime Movement back to Stage 1 will only occur
its inception in 2012. The Bank will write off all or account placed on the Bank’s Credit watch–list. 30 days past due. Expected where the borrower meets all the following: Strategic Report
part of the gross carrying amount of a financial Credit
asset under the following circumstances: All slot 5 customers are in stage 3 with the majority – The customer is on the Bank's Losses – Arrears have been fully cleared on the
categorised as being in default as a result of arrears watchlist, save for those accounts account.
in excess of 90 days. which have been added as a
– Where the underlying collateral of a loan has – The account has been 'performing' for a
been sold, with the proceeds having been result of the death of a customer, period of at least 6 consecutive months.
received by the Bank, and there is no reasonable The Bank’s Asset Finance and Classic Car exposures and where the death of that
expectation of recovering the remainder of the are allocated a Probability of Default (PD) at customer has not given rise to – The account has met all terms of any
outstanding balance due; origination which is reviewed on a monthly basis. any significant increase in credit forbearance measure granted and a
The PD is calculated using Moody’s Risk Calc risk as payments continue and are period of at least 6 consecutive months
– The write off has been approved in line with the system. The exposures are allocated a IFRS 9 stage expected to continue to be made. has passed since the forbearance
Bank’s policy; and depending on the status of the account and the ending, and the account has been
PD. Accounts which have triggered the Bank’s SICR – The underlying loan collateral ‘performing’ for this period. Corporate Governance Statement
– The Bank have explored reasonable avenues of is located in a particular
recovering the outstanding loan amount. (Significant Change In Credit Risk) criteria or are region or sector as defined – The account has been removed
over 30 days in arrears are as a minimum in stage 2.
The release of provisions and the write- Accounts over 90 days in arrears or are considered by the credit committee. from the Bank's watchlist and is not
off of any bad debt is subject to appropriate unlikely to pay are classified in stage 3. – Any other significant decline considered to have increased credit risk
delegated authorities. in credit quality has been for internal risk management purposes.
Provisioning stages identified by the Bank. – There are no other indicators that
Credit risk grades suggest credit risk has increased
Under IFRS 9 all the Bank’s lending exposures are – Management specifically
The Bank allocates each exposure a credit risk grade allocated a stage based on the current status of the place the case in stage 2 significantly since initial recognition.
(slot) using its Credit Grading Model. Each exposure loan. The Bank has set the following definitions for – There are no other connected accounts
has been allocated a credit risk grade on initial each of the three stages within IFRS 9: which meet the definition of a stage 2
recognition. Credit grades are formally reviewed asset.
as a minimum on an annual basis. The grades are
reassessed earlier if the customer falls into arrears Stage 3 – The account is over 90 days past due. Lifetime Movement from Stage 3 back to Stage 2 Independent Auditor’s Report
or contacts the Bank with information that impacts – The customer has been Expected will only occur when the borrower meets
its credit quality. declared bankrupt. Credit all the following:
Losses
– The company has been wound – The account is no longer more
The table below presents the Bank’s loan portfolio than 90 days down.
split by slot. Each loan account is allocated a slot up or a liquidator/administrator
between 1 and 4, with accounts in default allocated has been appointed. – No connected accounts are more
a slot 5. – The account is part of a connected than 90 days down.
exposure where the borrower meets – The customer has not been more
Lending split Stage 1 Stage 2 Stage 3 Total at least one of the above criteria than 90 days down for a consecutive
by slot as at (£m) (£m) (£m) (£m) across any connected account. period of 3 months.
31 December These criteria can be overridden by Where forbearance was extended, all terms Financial Statements
2021
management if the account: of the forbearance agreement were met,
1 – 2 632.9 4.1 – 637.0 and full payments have been made for a
– Is not guaranteed by other
3 109.2 56.3 – 165.5 members of the group. consecutive period of at least 3 months.
– The Bank are actively seeking
4 16.7 52.9 – 69.6 – Does not share the same security.
resolution and have obtained
5 – – 28.3 28.3 – Is a separate legal entity. cooperation from the borrower to
work to resolve the arrears.
Real Estate 758.8 113.3 28.3 900.4 – Is not deemed to spread contagion
Gross loans* to other group members. – There are no other indicators of default
which would warrant the accounting
Asset Finance 89.2 2.7 0.2 92.1 – The account is in forbearance remaining in stage 3.
Gross loan* and that forbearance is Notes to the Financial Statements
considered to be ‘significant’
* Includes effective interest rate (see relevant section below).
– Management judgement.