SICR Indicators Under IFRS 9: What Triggers Stage 2?
Significant Increase in Credit Risk (SICR) is the key trigger for Stage 2 classification under IFRS 9. Identifying SICR correctly is critical — missing it means under-provisioning; over-triggering it inflates ECL unnecessarily.
What is SICR?
SICR occurs when the credit risk on a financial instrument has increased significantly since initial recognition (IFRS 9 §5.5.3). When SICR is detected, the loan moves from Stage 1 (12-month ECL) to Stage 2 (lifetime ECL), which typically results in a significantly higher provision.
The 30-day rebuttable presumption
IFRS 9 §B5.5.28 states there is a rebuttable presumption of SICR when payments are more than 30 days past due. This means DPD > 30 should trigger Stage 2 unless you have strong evidence to rebut this presumption.
Borrower rating downgrade
A significant downgrade in borrower rating is a strong SICR indicator per §B5.5.17(c). LoanStage flags downgrades of 2 or more notches (e.g. A to C) as SICR. A single notch downgrade combined with other indicators (DPD, LTV) also triggers SICR.
Collateral deterioration (LTV)
High LTV is an SICR indicator per §B5.5.17(g). When the loan-to-value ratio exceeds 90%, collateral coverage is insufficient to protect against loss. LoanStage calculates LTV dynamically using collateral value, haircuts and outstanding balance.
Forward-looking indicators
IFRS 9 requires forward-looking information in SICR assessment (§B5.5.16). Negative sector outlook combined with weak borrower rating is an SICR trigger. LoanStage checks sector_outlook field in your CSV against borrower rating to detect this forward-looking SICR.
How LoanStage detects SICR
LoanStage checks all SICR indicators automatically: DPD thresholds, rating downgrades, LTV ratios, sector outlook, and forbearance flags. Every triggered indicator is logged with the specific IFRS 9 §B5.5.17 reference in the audit trail.
LoanStage checks all SICR indicators and classifies loans with the exact IFRS 9 reference logged.
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