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Forum | Papers » Credit risk and the determination of thresholds in the Ifrs 9 framework: the kinematic Sicr

Credit risk and the determination of thresholds in the Ifrs 9 framework: the kinematic Sicr

Luca Giordano, Alessandro Vistocco, Roberto Bartocetti
June 2025 - n. 6
Keywords: Rischio di credito, Ifrs 9, stage allocation, probabilità di default, expected credit loss, impairment
Jel codes: G33, G32, G21, M41

Under the Ifrs 9 accounting standard, entities are required to define a threshold for the significant increase in credit risk (Sicr) for classifying the performing exposures into Stage 1 and Stage 2 for the expected credit losses estimation. Despite various methodologies for the determination of the threshold have been observed in the market, the existing approaches exhibit limitations, whether in terms of methodological robustness, consistency with the requirements of the accounting standard or reliance on expert judgment. Notably, the quantile-based approach has been recently rejected by the Supervisory Authority. The approach proposed in the paper conceptualizes the risk profile of a credit exposure in analogy with the physical notion of speed, and its temporal change with that of acceleration. This link allows to obtain a closed-form expression for the Sicr threshold that addresses the aforementioned shortcomings. The approach enables large banks to adopt fully compliant and conceptually innovative Sicr thresholds, while smaller banks and non-financial firms can apply it even without historical data.

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