Company: BCS
Filing Date: 2025-02-13
Form Type: 20-F
Source: 0000312069-25-000114
Chunk: 542

Company: BARCLAYS PLC
Filing Date: 2025-02-13
Form: 20-F
Chunk 542
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, debt financial assets at fair value through other comprehensive income, loan commitments and financial guarantee contracts. At the reporting date, an allowance (or provision for loan commitments and financial guarantees) is required for the 12-month (Stage 1 ) ECLs. If the credit risk has significantly increased since initial recognition (Stage 2 ), or if the financial instrument is credit impaired (Stage 3 ), an allowance (or provision) should be recognised for the lifetime ECLs. The measurement of ECL is calculated using three main components: (i) probability of default (PD) (ii) loss given default (LGD) and (iii) the exposure at default (EAD). The 12-month and lifetime ECLs are calculated by multiplying the respective PD, LGD and the EAD. The 12-month and lifetime PDs represent the PD occurring over the next 12 months and the remaining maturity of the instrument respectively. The EAD represents the expected balance at default, taking into account the repayment of principal and interest from the balance sheet date to the default event together with any expected drawdowns of committed facilities. The LGD represents expected losses on the EAD given the event of default, taking into account, among other attributes, the mitigating effect of collateral value at the time it is expected to be realised and the time value of money. Expected credit loss measurement is based on the ability of borrowers to make payments as they fall due. The Group also considers sector-specific risks and whether additional adjustments are required in the measurement of ECL. Credit risk may be impacted by climate considerations for certain sectors, such as oil and gas. Determining a significant increase in credit risk since initial recognition: The Group assesses when a significant increase in credit risk has occurred based on quantitative and qualitative assessments. The credit risk of an exposure is considered to have significantly increased when: i) Quantitative test The annualised lifetime PD has increased by more than an agreed threshold relative to the equivalent at origination. PD deterioration thresholds are defined as percentage increases, and are set at an origination score band and segment level to ensure the test appropriately captures significant increases in credit risk at all risk levels. Generally, thresholds are inversely correlated to the origination PD, i.e. as the origination PD increases, the threshold value reduces. The assessment of the point at which a PD increase is deemed ‘significant’, is based upon analysis of the portfolio’s risk profile against a common set of principles and performance metrics (consistent across both retail and wholesale businesses