FINREP F 12.1 Movements in allowances and provisions for credit losses

How shall the impact of transfers between impairment stages be reported in template F 12.1.?

It is not clear how transfers between impairment stages be reported in template F 12.1. Shall all changes in the expected losses (including expected losses recognised on the initial recognition) be reported in the impairment stage in which the asset was included at the reporting reference date (e.g. Stage 2) independently of that the asset had been transferred between the impairment stages (e.g. from Stage 1 to Stage 2)? Or shall the changes in the expected losses be reported in different impairment stages (in which the asset was when the impairment was recognised)? Please explain it in case of the following 3 examples. Example 1: How shall the movements in allowances be reported in the report for 31 March? 1. 10 Jan: The Bank grants a new loan and recognises 10 impairment on the initial recognition in Stage 1. 2. 31 Jan: Due to increases in credit risk since initial recognition, additional 5 impairment is recognised. (This increase in expected losses don’t led to a transfer to another stage.) 3. 31 March: Due to increases in credit risk the loan is transferred from Stage 1 to Stage 2 and an additional 20 impairment is recognised. Example 2: Is there any difference if the initial recognition and the transfer between the impairment stages take place in different quarters? How shall the movements in allowances be reported in the report for 30 June and for 30 September? 1. 10 Jan: The Bank purchases a loan and recognises 10 impairment on the initial recognition in Stage 1. 2. 31 Jan: Due to increases in credit risk since initial recognition, additional 5 impairment is recognised. (This increase in expected losses don’t led to a transfer to another stage.) 3. 30 Jun: Due to increases in credit risk the loan is transferred from Stage 1 to Stage 2 and an additional 20 impairment is recognised. 4. 30 Sept: Due to partial repayment via instalments and decreases in credit risk, the loan is transferred from Stage 2 to Stage 1 and the amount of impairment decreased by 30. Example 3: How should the transfer between stages be reported if the asset has been already recognised in the previous financial year? How shall the movements in allowances be reported in the report for 30 June? 1. On 31 December 2017 Bank has a loan classified in Stage 1, on which the Bank recognised 10 impairment. 2. On 30 June: Due to increases in credit risk the loan is transferred from Stage 1 to Stage 2 and an additional 35 impairment is recognised.