IFRS Provision

 

IFRS Provision system for prudent provision calculation

Provisioning standards have been significantly improved in the previous years, requiring enormous resources from the Banks to comply with the regulatory and internal requirements. The Loxon IFRS Provision Calculation Engine provides the options for the Banks to calculate their provisions both under IAS 39 and IFRS9 standards.

  • Have a perfect insight into the logic of the provision calculation system instead of using a black box solution
  • Have full control over your provisioning process
  • Have a complete overview about your portfolio (including provision figures) via reports in different levels (e.g. management, drill-downs and analytical reports)
  • Have a flexible system with a data mart that can flexibly be adapted to your source systems
  • Flexibly maintain the calculation formulas as per changing business and risk policies
  • Reconcile all data in the system with the general ledger
  • Use different Expected Credit Loss (ECL) approaches
  • Simulate different calculations and compare the results
  • Forecast provision results
  • Track the evolvement of provisions over time and compare different periods as trend analysis
  • Fully track expert judgment related modifications
  • Apply multiple models for the same portfolio in the same time
  • Generate provision related regulatory reports from the application
  • Have a perfect insight into the logic of the provision calculation system instead of using a black box solution
  • Have full control over your provisioning process
  • Have a complete overview about your portfolio (including provision figures) via reports in different levels (e.g. management, drill-downs and analytical reports)
  • Have a flexible system with a data mart that can flexibly be adapted to your source systems
  • Flexibly maintain the calculation formulas as per changing business and risk policies
  • Reconcile all data in the system with the general ledger
  • Use different Expected Credit Loss (ECL) approaches
  • Simulate different calculations and compare the results
  • Forecast provision results
  • Track the evolvement of provisions over time and compare different periods as trend analysis
  • Fully track expert judgment related modifications
  • Apply multiple models for the same portfolio in the same time
  • Generate provision related regulatory reports from the application
 

Why Loxon IFRS Provision system?

The Loxon IFRS Provision Calculation Engine offers not only the calculation/quantification of the provisions but provides multiple additional functionalities in a parameterizable manner.

By using the IFRS Provision engine you will be able to cover the provision calculation related additional requirements, such as portfolio segmentation for modeling purposes; model calculations using inbuilt Expected Credit Loss (PD and LGD) models for both IAS 39 and IFRS9; ILLP-PLLP segmentation for IAS39 or Stage 1-2-3 segmentation for IFRS9; expected future cash flow calculation; and other elements as well.

Additional to the automated and parameterized calculations, Loxon acknowledges the importance of the expert judgment in this field; therefore the engine provides the option to include these elements in the forms of overrides (like portfolio reassignment, PD/LGD overrides, ILLP/PLLP and Stage reclassification, etc.) that are fully traced.

What does the Loxon IFRS Provision system offer:

By using the Loxon IFRS Provision system You can manage the calculation flow of provisions in a way that is parameterizable by the users, is fully automated but provides the necessary manual interaction options. 

The parameterization and calculation options include portfolio building and model calculation options utilizing the functionalities of the embedded Loxon Rating/Scoring System which provides the Expected Credit Loss (PD models, including 12 months and lifetime expected PD as well as LGD models) model calculations. In Loxon Rating/Scoring System the determination of PD and/or LGD figures of a given customer /exposure could be based on expert judgment, statistical or combined models. The set of possible explanatory variables strongly depend on the asset segment (e.g. sovereign, retail, corporate, etc.) and the length of the future time horizon of the risk assessment (12 months or lifetime) that is flexibly supported by the system.

By using the classification module the ILLP-PLLP under IAS39 or Stage 1-2-3 segmentation is covered providing possibility to determine SICR (significant increase in credit risk) as well.

The reporting module of the system covers your reporting requirements as well providing both regulatory and tailor-made reports.

If you decide to implement both the Loxon IFRS and Basel solutions then additional synergies are available since due to the integration of the mentioned, the provision results are utilized for the capital adequacy calculations automatically.

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