/ifrs9-staging

name: ifrs9-staging
description: >
  Activate for: SICR, significant increase in credit risk, staging assessment,
  stage migration, Stage 1 to Stage 2, rebuttable presumption, 30 days past due,
  90 days past due, watchlist, covenant breach, stage cure, qualitative SICR.
  NOT for: initial recognition and measurement of financial instruments, hedge
  accounting, IFRS 9 classification questions, US GAAP CECL staging.
metadata:
  version: "1.0"
  author: "Panaversity — The AI Agent Factory"
  standard: "IFRS 9.5.5 Impairment"

STAGING DECISION TREE — APPLY IN THIS EXACT ORDER

STEP 1 — Test for Stage 3 (Credit Impairment)

Any one of the following triggers Stage 3: [ ] 90+ days past due [ ] Formal default event (insolvency filing, legal default notice) [ ] Significant financial difficulty, no credible recovery path [ ] Forbearance / restructuring at terms bank would not otherwise offer [ ] Partial or full write-off recognised → If ANY trigger: STAGE 3 — Lifetime ECL — Interest on NET amount

STEP 2 — Test for Stage 2 (SICR)

Any one of the following triggers Stage 2: Quantitative: [ ] 30–89 days past due (rebuttable presumption — see below) [ ] Internal rating downgraded 2+ notches since origination [ ] PD at reporting date ≥ 2x PD at origination (many banks use this) [ ] Lifetime PD exceeds bank-defined absolute SICR threshold Qualitative: [ ] On watchlist / credit monitoring list [ ] Financial covenant breach (leverage, DSCR, LTV, interest cover) [ ] Loss of major customer / key contract [ ] Adverse regulatory action on borrower [ ] Industry under systemic stress (macro-driven transfer) [ ] Parent / key affiliate significant SICR → If ANY trigger: STAGE 2 — Lifetime ECL — Interest on GROSS amount

STEP 3 — Default: Stage 1

No triggers from Step 1 or Step 2 → STAGE 1 — 12-month ECL

THE 30-DAY REBUTTABLE PRESUMPTION

IFRS 9.5.5.11: 30+ DPD creates a rebuttable presumption of SICR. Can be rebutted ONLY with documented evidence of:

• Administrative processing delay (not customer fault)
• Payment in bona fide dispute with clear resolution pathway
• Payment received shortly after reporting date (documented)

CANNOT be rebutted on grounds of: past payment history, prior accommodations. DOCUMENT every rebuttal. Auditors review all instances where 30+ DPD was not staged.

STAGE CURE CONDITIONS

Stage 3 to Stage 2 Cure Requirements

All of the following must be satisfied before cure to Stage 2: a) All default triggers resolved (no longer 90+ DPD, no active forbearance) b) Satisfactory probation period completed (typically 3–6 months depending on portfolio — retail tends to 3 months, corporate 6 months) c) Updated financial information reviewed and credit assessment performed d) Credit officer sign-off on cure determination (documented) e) No new adverse information during probation period (no new covenant breaches, no adverse media, no further deterioration in financial metrics) f) If forbearance was the trigger: the borrower must have made at least 3 consecutive scheduled payments under the revised terms

Stage 2 to Stage 1 Cure Requirements

All of the following must be satisfied before cure to Stage 1: a) All SICR triggers resolved (rating restored, no longer past due, covenant compliance restored) b) Probation period current (typically 3–12 months; banks with large corporate portfolios often require 6–12 months to confirm sustained improvement) c) Borrower risk profile demonstrably back to the level at origination d) No residual concerns that would indicate risk remains elevated e) Quantitative PD at reporting date no longer meets the SICR threshold relative to origination PD

Cure Probation — Common Pitfalls

• Setting probation too short (< 3 months) will draw auditor challenge
• Not documenting the cure rationale is equivalent to having no cure process
• Curing a borrower from Stage 3 directly to Stage 1 without a Stage 2

probation period is NOT permitted under IFRS 9 (must pass through Stage 2)

QUALITATIVE SICR — PROFESSIONAL JUDGMENT FRAMEWORK

When qualitative factors are present, apply this framework: 1. What specific information suggests deterioration? 2. How significant is this relative to risk at origination? 3. Would a prudent lender consider credit risk materially higher than at origination? 4. Is there documented evidence that risk has NOT materially increased? If answer to (3) is YES and (4) cannot be answered convincingly: Stage 2. DOCUMENT all qualitative staging decisions — auditors will challenge undocumented assessments where observable risk signals were present.

Qualitative SICR Examples by Portfolio

| Portfolio | Qualitative SICR Trigger | Evidence Required | |---|---|---| | Corporate | Loss of largest customer (>30% revenue) | Customer filing, revenue data | | Corporate | Covenant breach — DSCR below 1.2x | Financial statements | | Corporate | Sector downgrade by regulator or rating agency | Published report | | Mortgage | Borrower made redundant (known to bank) | Employment status change | | Mortgage | Property value decline >20% (negative equity) | Valuation data | | SME | Owner/director personal insolvency | Public register search | | SME | Key supplier ceased trading | Credit bureau data | | Consumer | Material increase in credit bureau arrears on other products | Bureau data |

STAGE MIGRATION TABLE FORMAT

| Migration | # Facilities | Balance (M) | ECL Before | ECL After | P&L Impact | |---|---|---|---|---|---| | Stage 1 to 2 | X | X | 12-mo ECL | Lifetime ECL | Increase | | Stage 1 to 3 | X | X | 12-mo ECL | Lifetime ECL | Increase | | Stage 2 to 3 | X | X | Lifetime ECL | Higher lifetime ECL | Increase | | Stage 3 to 2 (cure) | X | X | Lifetime ECL | Lower lifetime ECL | Decrease | | Stage 2 to 1 (cure) | X | X | Lifetime ECL | 12-mo ECL | Decrease | Every migration must trace to a specific trigger event in audit