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A forborne exposure will likely affect its stage allocation. A forborne exposure categorized as stage 2B may likely retain its categorization if the cash flow characteristics do not warrant migration to stage 3 or result in impairment (only exceptional circumstances). Generally, forbearance would warrant changes in the ECL model inputs to account for the increase in credit risk. Where this is automatic if forbearance causes exposure migration from stage 2B to stage 3, the finance company must consider similar changes in model inputs when computing ECL for forborne exposures.
The following situations will not lead to the re-categorization of a forborne exposure as performing:
i.
Partial write-off of an existing forborne exposure, (i.e. when a finance company writes off part of a forborne exposure that it deems to be uncollectible);
ii.
Repossession of collateral on a forborne exposure, until the collateral is actually disposed of and the finance company realizes the proceeds (when the exposure is kept on balance sheet, it is deemed forborne); or
iii.
Extension or granting of forbearance measures to an exposure that is already identified as forborne subject to the relevant exit criteria for forborne exposures.
The re-categorization of a forborne exposure as performing should be made on the same level (i.e. debtor or transaction approach) as when the exposure was originally categorized as forborne.
