c. Credit card and other revolving facilities For credit card facilities and other revolving facilities that include both a loan and an undrawn commitment component, the Group and Company measure ECL over a period longer than the maximum contractual period if the Group’s and Company’s contractual ability to demand repayment and cancel the undrawn commitment does not limit the Group’s and Company’s exposure to credit losses to the contractual notice period. These facilities do not have a fixed term or repayment structure and are managed on a collective basis. The Group and Company can cancel them with immediate effect but this contractual right is not enforced in the normal day-to-day management, but only when the Group and Company become aware of an increase in credit risk at the facility level. This longer period is estimated taking into account the credit risk management actions that the Group and Company expect to take and that serve to mitigate ECL. These may include a reduction in limits, cancellation of the facility and/or turning the outstanding balance into a loan with fixed repayment terms and set-offs against balances in case of factoring. For revolving facilities that include both a loan and an undrawn commitment, ECLs are calculated and presented together with the loan. A capped lifetime approach of 12 months is used on credit card and other revolving facilities. d. Forward looking information In its ECL models, the Group and Company rely on a broad range of forward-looking information as macroeconomic factors inputs using weighted average forward projection scenarios which are adjusted in the base model. The inputs and models used for calculating ECLs may not always capture all characteristics of the market at the date of the financial statements. To reflect this, qualitative adjustments or overlays are occasionally made as temporary adjustments when such differences are significantly material. Detailed information about these inputs are provided in Note 4.1 (d). e. Collateral valuation The Group and Company seek to use collateral, where possible, to mitigate its risks on financial assets. The collateral comes in various forms such as cash, securities, guarantees, real estate, receivables, other non-financial assets and credit enhancements such as netting agreements. The fair value of collateral is generally assessed, at a minimum, at inception and when the Group and Company determine there is a requirement to do so. To the extent possible, the Group and Company use active market data for valuing financial assets held as collateral. Other financial assets which do not have readily determinable market values are valued using models. Non-financial collateral, such as real estate, is valued based on data provided by independent surveyors. f. Modification of financial assets A modification of a financial asset occurs when the contractual terms governing the cash flows of a financial asset are renegotiated or otherwise modified between initial recognition and maturity of the financial asset. A modification affects the amount and/or timing of the contractual cash flows either immediately or at a future date. The Group and Company renegotiate loans to customers in financial difficulties to maximise collection and minimise the risk have of default. Indicators of financial difficulties include default on covenants, bankruptcy, or significant concerns raised. Once the terms been renegotiated, any impairment is measured using the original interest rates as calculated before the modification of terms. In the case where the financial asset is derecognised, the loss allowance for ECL is remeasured at the date of derecognition to determine the net carrying amount of the asset at that date. If modifications are substantial either quantitatively or qualitatively, the loan is derecognised as explained under write-offs. g. Write-offs Financial assets are written off either partially or in their entirety only when the Group and Company have no reasonable expectations of recovering the financial assets. If the amount to be written off is greater than the accumulated loss allowance, the difference is first treated as an addition to the allowance that is then applied against the gross carrying amount. Any subsequent recoveries are credited to credit loss expense. 125 OUR YEAR AT A GLANCE OUR PEOPLE GOVERNANCE FINANCIAL STATEMENTS
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