alleryStart learning →If credit risk recovers after a lifetime allowance, what happens to the allowance basis?
AIt stays lifetime forever
BIt is written off fully
CIt reverts to 12-month losses
DIt is moved to equity
Answer & Solution
Correct answer: C. It reverts to 12-month losses
When credit risk recovers, the allowance can again be limited to projected credit losses over the following 12 months.
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