From climate scenarios to expected credit losses

Questions for institutional practice

1. Separate physical and transition shocks from the observed baseline.
2. Translate stress into borrower revenue, costs, cash flow and collateral.
3. Use bank-approved PD, LGD and EAD models for credit impacts.
4. Distinguish IFRS 9 ECL from capital stress losses and actual liquidity flows.

Methods should be reviewed for institutional data quality, model governance and applicable requirements. This perspective is educational and does not constitute investment, legal or regulatory advice.