Company: BCS
Filing Date: 2025-02-13
Form Type: 20-F
Source: 0000312069-25-000114
Chunk: 523

Company: BARCLAYS PLC
Filing Date: 2025-02-13
Form: 20-F
Chunk 523
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 following: • Model estimations – Complex and subjective auditor judgement was applied in assessing the Company’s modelled estimations of Expected Credit Losses (“ECL”) due to the inherently judgemental nature of the underlying models including the IFRS 9 Probability of Default (“PD”) models, the Loss Given Default (“LGD”) models and the Exposure at Default (“EAD”) models, and the associated assumptions. Certain IFRS 9 models and assumptions are the key drivers of complexity and uncertainty, and minor changes to these could have a significant effect on the Company’s calculation of the ECL estimate. • Economic scenarios – Complex and subjective auditor judgement was applied in assessing the forward-looking economic scenarios used by the Company as an input to calculate ECL, the probability weightings applied to them and the complexity of models used to derive the probability weightings. • Qualitative adjustments – Complex and subjective auditor judgement was applied in assessing certain qualitative adjustments to the model-driven impairment allowance due to the inherent estimation uncertainty associated with these adjustments. The following are the primary procedures we performed to address this critical audit matter. • We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s process for estimating the impairment allowance for loans and advances at amortised cost, including off-balance sheet elements. This included controls relating to the (1) application of the staging criteria, (2) model validation, implementation and monitoring, (3) authorisation and calculation of qualitative adjustments and management overlays, (4) selection and implementation of economic variables and the controls over the economic scenario selection and probabilities, and (5) credit reviews that determine customer risk ratings used in the models for a population of wholesale customers. • We involved credit risk modelling professionals with specialised skills and knowledge, who assisted in the following: – Evaluating the Company’s impairment methodologies for compliance with IFRS 9; – Inspecting model code for the calculation of certain components of the ECL model to assess its consistency with the Company’s modelling methodology; – Evaluating model changes (including the updated model code) for a selection of models which were changed or updated during the year as to whether they were appropriate by assessing the updated model methodology against the applicable accounting standard; – Reperforming the calculation of certain adjustments to assess consistency with the qualitative adjustment methodologies; – Evaluating the model output for a selection of models by inspecting the corresponding model functionality and independently implementing the model by rebuilding the model code and comparing our independent output with management’s output; – Assessing the appropriateness of