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Archive » April 2026 » Forward looking or Backward looking? Credit risk and application of the Ifrs 9 framework in Italy

Forward looking or Backward looking? Credit risk and application of the Ifrs 9 framework in Italy

Luca Giordano
April 2026 - n. 4
Keywords: Allocation, Expected Credit Loss, Forward looking, proiezioni macroeconomiche
Jel codes: G33, G32, G21, M41

The Ifrs 9 accounting standard requires the calculation of the impairment for the credit portfolio to reflect the expected evolution of the macroeconomic context (Forward looking component). This must be considered both for the classification of the performing loans into Stage 1 and Stage 2 and for the computation of the Expected Credit Loss. However, frequent recalibration of the risk parameters based on the recent historical data, along with potential financial reporting policy effects, may result in estimates also influenced by past macroeconomic cycle dynamics (Backward looking component). The aim of this work is to verify whether the key metrics of the Ifrs 9 framework (Stage 2 allocation percentage and Stage 2 coverage ratio) are primarily driven by the Forward-looking component rather than the Backward looking one, as required by the accounting standard. The outcome of the analysis shows that the Backward looking component is slightly more suitable for describing the evolution of Ifrs 9 framework metrics; however, it remains critical to assess in the future whether a greater importance of the Forward looking component can be achieved.

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