What Lenders Should Prepare Before ECL Testing

Expected credit loss (ECL) work rarely fails because the formula is wrong on paper. It fails because the loan tape, staging rules, and write-off policy do not line up with what the model claims to do.

Before fieldwork, export a loan-level tape with origination date, product type, days past due, collateral flag, and last payment date. Lock the extract date so the tape matches the trial balance you send us.

Write a one-page staging policy that a new hire could follow: when a loan moves from stage 1 to stage 2, how cures work, and how forbearance is treated. Ambiguous cure rules are a frequent cause of restatement discussions.

Keep the prior-year model documentation. If your data science team refreshed PD curves mid-year, note the effective date and which cohorts were affected. We test whether the financial statements used the curves that the board approved.

Finally, prepare a small sample of borrower files for collateral verification. Photograph or scan pledge documents; we will not rely on a spreadsheet column alone when collateral reduces the loss given default.