The Regulators require transparency across the UAE banking sector during this crisis. It is essential that banks and finance companies provide additional relevant and comprehensive disclosures related to ECL computation in their 2020 Q1 audited financials and subsequent audited reporting until the end of the Covid-19 crisis.
Banks and finance companies shall report material changes that occurred in their books since December 2019, susceptible to impact of ECL. This disclosure should contain detailed information related to each of the items listed below, and any other items the bank deems relevant:
• The proportion of TESS clients per portfolio or product, for wholesale and retail clients.
• When identified, the proportion of Group 1 and Group 2 clients as defined in this Joint Guidance, per portfolio, with their associated exposure, ECL, stage and average PD and LGD. Information on TESS clients shall be disclosed, for instance, in terms of size of counterparts, industry, rating and product types.
• A breakdown of exposures associated with staging migrations covering TESS and non-TESS clients.
• The changes in EAD since December 2019 and the expected future changes.
In addition, banks and finance companies should disclose their approach employed during this exceptional period to assess ECL components and the required grouping of TESS customers. This disclosure should contain detailed discussion related to each of the below items, and any other items the bank deems relevant:
• The dedicated crisis-focused governance put in place for the purpose of grouping decisions, macroeconomic scenario adjustment and any other management overlay.
• Quantitative analyses performed with the information available.
• Assumptions and judgements supporting the estimation of ECL components.
• Any update made to the macro forecasts.
• Any judgmental overlay implemented at portfolio of product level.