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Task:
1) How would the bank estimate the provision for expected credit losses at
Task:
1) How would the bank estimate the provision for expected credit losses at initial
recognition?
2) After 36 months, Ethel’s score has increased to 6, how will this impact the provision for expected credit loss? What would the accounting implications be if Ethel instead defaulted and the score is set to 20? Collateral value has not changed.
3) Elaborate on the implications for the bank if the changes in scoring is not specific for Ethel but is caused by an overall decrease in credit quality within the segment to which Ethel belongs and also the value of properties within the area.
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