UK banks model their expected credit losses (ECL) using an array of forward-looking scenarios. The dispersion of these scenario outputs, however, varies wildly from bank to bank, reflecting how the coronavirus is clouding firms’ macroeconomic predictions.

Each bank uses its own set of scenarios, which typically include base case, upside and downside iterations, to ballpark expected losses, and then blends the outputs together to arrive at its modelled ECL amount. Modelled ECL amounts inform the