Reasonable and Supportable Information
Definition
Reasonable and Supportable Information, in the context of IFRS 9 [1], is the requirement that firms use relevant facts and sound (experienced) credit judgement when forming Expected Credit Loss estimates.
Regulatory Guidance
BIS notes[2] that banks are required to consider a wide range of information when applying ECL accounting models. Information considered should be relevant to the assessment and measurement of credit risk to the particular lending exposure being assessed and should include information about
- past events
- current conditions and
- forecasts of future economic conditions.
Information which is ultimately included in the assessment of credit risk and measurement of ECL should also be reasonable and supportable. Banks should use their experienced credit judgement in determining the range of relevant information that should be considered and in determining whether information is considered to be reasonable and supportable. Reasonable and supportable information should be understood as information based on relevant facts and sound judgement.
The EBA definition of Reasonable and Supportable Information is identical to the BIS Guidance[3]
Operationally, there is a requirement for an effective process to ensure that all relevant and reasonable and supportable information, including forward-looking information, is appropriately considered in assessing credit risk and measuring ECL. This includes
- maintaining appropriate reports
- details of reviews performed
- and identification and descriptions of the roles and responsibilities of staff involved
