Question

BankCo holds debt securities: • Portfolio A:

Q: Answer-BankCo holds debt securities: • Portfolio A: Government bonds held to collect contractual interest/p...

SICR significant increase in credit risk requires lifetime ECL even without default. For FVTOCI debt, impairment allowance goes to PL with offsetting entry in OCI.

Government bonds held to collect contractual interest/principal. • Portfolio B: Corporate bonds held to collect and occasionally sell to manage liquidity. • Portfolio C: Equity investments in FinTech start-up for strategic relationship. BankCo assesses Portfolio B (corporate bonds FVTOCI). Market credit spreads widened, PDs increased, though no actual default. Management wants to keep 12-month ECL citing “no actual loss.” Which treatment is correct?

A Continue with 12-month ECL since no default.

B Move to lifetime ECL (Stage 2) as credit risk increased significantly, even without default.

C No impairment required because FVTOCI.

D Provide impairment only when selling bond.

E Recognise provision through OCI not P&L.

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BankCo holds debt securities: • Portfolio A:

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