IFRS 9 Expected Credit Loss Modeling Without Startup History

Summary

The document addresses how a startup fintech might estimate expected credit losses under IFRS 9 when it has little or no internal loss history. The brief answer says the valuation cannot rely exclusively on historical observations and should incorporate macroeconomic data and the broader economic environment. It also suggests using information from similar companies as an additional source of evidence.

This is a high-level set of modeling considerations, not a development recipe. It does not explain how to select peer data, adjust it for portfolio differences, project macroeconomic scenarios, estimate probability of default or loss given default, or validate the resulting model. The response points to IFRS 9 guidance but supplies no worked example or evidence about model performance. A startup would therefore need further methodological and regulatory work to translate these principles into a defensible ECL estimate.

Key ideas

• IFRS 9 expected credit loss estimates should not rely solely on historical values.
• Macroeconomic information and the current economic environment should inform the assessment.
• Data from comparable companies may help when a startup lacks its own loss history.
• The response offers broad considerations but no detailed estimation or validation procedure.
• Peer information requires further work before it can support a specific portfolio estimate.

Tags

# What would be the ideal way to develop ECL model for startup fintech when there is no historical data


# What would be the ideal way to develop ECL model for startup fintech when there is no historical data












What would be the ideal way to develop the IFRS9 ECL model for startup fintech when there is no historical data.

## Answer by user51037 (score 0)

https://quant.stackexchange.com/a/65753

According to the regulations of IFRS 9, the valuation for the ECL is not permitted exclusively on the basis of historical values. (For example, IFRS 9.B5.5.17). The inclusion of macroeconomic data and the economic environment is also desired. Similar companies can also be included in the valuation.

I hope this answers your question.

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