ECL Model its impact in the midst of COVID-19 Global Crisis -The test of a Financial Crisis driven model in times of Global Crisis

Abstract

The disruption throughout the globe due to the COVID-19 disease has caused tremendous uncertainty and difficulty in the financial sector. The Expected Credit Loss (ECL) model was introduced in the aftermath of the 2008 global financial crisis, to curb the loopholes of the incurred loss model and to provide a forward looking approach in the accounting of loan loss provisioning by inclusion of various credit measures. The current global COVID-19 disruption is an event when the ECL model should provide transparency to users of financial statements. This paper is a modest attempt to shed light on the factors to be considered in accounting for ECL in the light of the current uncertainty resulting from the COVID-19 disruptions.