CAPITA FINANCIAL SERVICES INC. (ST. LUCIA BRANCH) Notes to the Financial Statements March 31, 2024 (expressed in Eastern Caribbean dollars) 43 20 Financial Risk Management ...continued Credit risk management …continued Amounts arising from Expected Credit Losses (ECL) …continued Forward looking macroeconomic projections …continued Our base scenario accounts for the expected gradual recovery of Caribbean economies during 2023-2024 and for continued expansion in the economy thereafter, with non-performing loans maintaining a downward trajectory for 2024-2025. Our downside scenario adjust for negative trends which can adversely affect the future of the economy. Our upside scenario considers a marginal improvement on base conditions resulting from faster than expected economic recovery. The forecasts of GDP growth rates were informed by external economic projections of key regulatory authorities. Internal assessment of the level of resilience of large clients The PDs used are specific to the type of loan and automatically adjusted for the borrower’s position during the financial year. This adjustment was reflective of the main economic sector impacted by unemployment. Recent portfolio performance The PD used are specific to the portfolio segments and automatically adjusted to take into account recent portfolio performance. Portfolios which have shown high resilience to adverse economic conditions would have lower PD levels than portfolio with higher default rates. Changes in scenario design and the weights associated to each scenario All scenarios considered in our analysis include the impact of the economic conditions as at March 31, 2024; reflective of current economic conditions. In determining our IFRS 9 allowance for credit losses, we reassessed our scenario weights to more heavily weigh the downside scenarios contrast to that which was predicted.
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