LIC Solution® for calculating Expected Credit Loss

EY provides its proprietary robust IT solution for regular ECL calculations in compliance with IFRS 9 or US GAAP standards. The LIC Solution® is flexible both to institution’s possible inputs and during calculation phase and provides a user-friendly environment with the ability to control and track changes made by authorized users..

The team

Tomáš Němeček

EY Czech Republic, Partner, Financial Services Consulting in Central Europe

Radek Laštovička Radek Laštovička

EY Czech Republic, Senior Manager in Financial Services Consulting

Michal Mareš

EY Czech Republic, Manager in Financial Services Consulting

What EY can do for you

The LIC Solution® is EY’s premier IT solution for financial institutions meeting the IFRS 9 or US GAAP standard for ECL calculation. It is a flexible solution which can be easily integrated into an institution’s IT architecture. Based on the institution-specific input data and the best fitting calculation approach, the LIC Solution® provides granular expected credit loss outputs, calculates the risk parameters and unwinding of interest.

Some of the key benefits are:

Wide variety of pre-coded alternative calculation approaches allowing an institution to choose the best fitting approach and to deploy the solution in a short time

The LIC Solution® has been successfully implemented in numerous banks, consumer credit institutions, leasing companies and insurance companies across Europe, Asia and the U.S

The key concepts of the LIC Solution® are IFRS9 (or US GAAP) compliance, and ease of use while at the same time, all the major challenges of ECL calculation are covered.

The solution supports full auditability of ECL calculations through complex management of user access rights and the tracking of action made by authorized users, otherwise known as the audit log function.

Few examples EY LIC Solution® flexibility

Configuration of automatic selection and de-selection criteria for Individual Assessment

Configuration of traffic lights indicating the need for re-assessment

Definition of work flow (roles & rules) in Individual Assessment, e.g. Inputter, Reviewer, Approver
Performing calculation runs with different parameter’s forward looking calibrations allows to weight them into the multiple probability weighted scenario ECL calculation

Calculating runs with different parameter’s configuration supports the sensitivity analysis as well as the specific ECL calculations for Stress Testing purposes
IFRS9 staging criteria can reflect institution specific and asset portfolio-specific Days Past Due thresholds, Significant Increase in Credit Risk since origination with editable thresholds for rating grade deterioration or lifetime PD deterioration or 12-month PD deterioration, various risk flags and customized handling of special cases like a missing risk assessment at origination or assets still recorded on balance after their contractual maturity
Several alternative ECL calculation formulas for the Collective assessment method and approaches for special classes of assets like POCI and IFRS 9 Simplified Approach for receivables

Multiple risk parameter’s calculation options for PD, LGD, EAD, Prepayments and Forward Looking Adjustments
The audit log function allows us to differentiate from immature Excel based solutions:

The LIC Solution® supports Active Directory authentication of users. It enables a seamless single-sign-on user experience and centrally managed access rights within the institution.

Permissions for roles are set by selecting them from the list of atomic permissions (e.g. view permission for particular screens, data modification permissions).

General auditing functionality – tracking all user and administrator actions in the solution.

Audit reports – visualize/look up the user’s activity data.

The flexible configuration of calculation and assessment approaches makes the solution quick and easy to deploy while reflecting the specifics and the data availability of each portfolio of the institution’s assets.

Let us introduce our complementary products that are fully compatible with the LIC Solution®:

Empower your LIC Solution® for mandatory ESG reporting with EY Carbon Footpring Engine

Follow the evolution of the provisions, evaluate their adequacy and interpret dynamic changes with the intuitive and visually rich interface of EY EPIC

Ensure that your EIR and CA-EIR calculations are fully IFRS9 compliant with EY EIR Engine

We are ready to illustrate our solutions in a live demo presentation.