Jaywing has completed its work with Starling Bank to deliver an IFRS 9 modelling framework for the calculation of IFRS 9 Expected Credit Losses on the Coronavirus Business Interruption Loan portfolio.

Following appointment in June, Jaywing has built a data-driven model with flexibility, pragmatism and expert judgement to facilitate the provision of government-backed loans to support small businesses affected by coronavirus (Covid-19) with immediate liquidity needs.

The model enables Starling Bank to react quickly to the timing and emergence of defaults and is future-proofed to enable specific sectoral concerns caused by Covid-19 to be reflected. The model incorporates characteristics which would not be present historically, for example, the Government guarantee and the non-payment period for the customer.

Commercial lenders have been required to adjust impairment models to account for CBILS whilst also continuing to satisfy the standard IFRS 9 requirement to incorporate forward-looking information in the estimation of loss. Through working closely with the Starling Bank team, Jaywing has delivered a compliant solution within a short timeframe. This has enabled Starling Bank to own an impairment modelling framework that incorporates key elements that distinguish CBILS from traditional commercial loans. At the same time, it is flexible enough to be able to produce updated outputs as new information becomes available.

Declan Ferguson (Chief Strategy Officer), Starling Bank, commented: “We’re delighted to be working with Jaywing on developing Starling’s IFRS 9 model for SME loans, and have been impressed by Jaywing’s experience in credit risk analytics and ability to deliver the project within a short timeframe for our Funding Circle CBILS portfolio.”