CITIC Limited Half-Year Report 2020

99 CITIC Limited Half-Year Report 2020 For the six months ended 30 June 2020 Notes to the Consolidated Financial Statements 29 Financial risk management and fair values (continued) (a) Credit risk (continued) Measurement of the expected credit losses (“ECL”) (continued) (4) Forward-looking information The assessment of significant increase in credit risk and the calculation of ECL both incorporate forward-looking information. The Group has performed historical analysis and identified the key economic variables impacting credit risk and ECL for each asset portfolio. These economic variables and their associated impact on the PD vary by financial instruments. Expert judgment has also been applied in this process, forecasts of these economic variables are estimated by the experts of the Group on a yearly basis, and the impact of these economic variables on the PD and the EAD was determined by statistical regression analysis. In addition to the base economic scenario, the Group determines the possible scenarios and their weighted by a combination of statistical analysis and expert judgment. The Group measures ECL as either a probability weighted 12 months ECL (stage 1) or a probability weight lifetime ECL (stage 2 and stage 3). These probability-weighted ECL are determined by running each scenario through the relevant ECL model and multiplying it by the appropriate scenario weighting. Macroeconomic scenario and weighting information The Group has built a macro forecast model, and performed historical analysis and identified the key economic variables impacting credit risk and ECL for each portfolio, such as domestic Gross Domestic Product (“GDP”), electricity production and registered urban unemployment rate, etc.