CFSL Integrated Report 2025

RISK MANAGEMENT

106

Corporate Governance

Statutory Disclosures

Financial

LOSS GIVEN DEFAULT

EXPOSURE AT DEFAULT

The Loss Given Default (‘LGD’) refers to the magnitude of the likely loss on a given facility in the event of default. It takes into account the loss of principal, interest foregone and workout expenses. The LGD estimation for Cim Finance has been updated with additional data for the recent period. The LGD estimates include the following key elements within the methodology: (i) Cure Rate, (ii) Recovery Rate, (iii) Discounting Rate, (iv) Administration Cost. The models are derived using the logistic regression technique and yielded to statistically significant estimates. When historical data is insufficient for modelling, Basel estimates of LGD for unsecured exposures are applied.

The Exposure At Default (‘EAD’) refers to the gross carrying amount of the financial instruments in the event of obligor default. The period for which cash flows are determined is generally limited to the maximum contractual period for which the Company is exposed to credit risk, except for credit cards, the maximum period for which the credit losses are determined is the contractual life of the financial instrument, unless the Company has the legal right to call it earlier. These expected cash flows are discounted using the effective interest rate on the financial instruments.