Roll rate analysis for ECL

Roll rates are the method of choice for credit cards, consumer finance and companies with many small customers, because they react quickly when customers start paying later. This guide explains how roll rates are calculated, how they become loss rates, and works through seven months of data.

By Awais Jameel, Chartered Accountant. Reviewed by Muhammad Bilal, Chartered Accountant. 3 minute read.

Short answer

Roll rate analysis estimates expected credit losses from how balances move between delinquency buckets each month. The roll rate for a bucket is the share of its balance that moves into the next, older bucket a month later; the cumulative loss rate for a bucket is the product of its roll rate and every later roll rate through to write-off. In this guide's example, 8% of current balances roll to 1-30 days each month, and the cumulative loss rate on current balances is 0.32%, giving an allowance of 15,841.

At a glance

Roll rate
Share moving to the next bucket in a month
Loss rate
Product of roll rates to write-off
Data
Monthly balances by delinquency bucket
Strength
Reacts quickly to payment behaviour
Used by
Card issuers, consumer lenders, retailers
Excel
Roll rate model
Roll rate analysis for ECLRoll rate: Share moving to the next bucket in a month; Loss rate: Product of roll rates to write-off; Data: Monthly balances by delinquency bucket; Strength: Reacts quickly to payment behaviour; Used by: Card issuers, consumer lenders, retailers; Excel: Roll rate model.KEY FACTS AT A GLANCERoll rate analysis for ECLRoll rateShare moving to the nextbucket in a monthLoss rateProduct of roll rates towrite-offDataMonthly balances bydelinquency bucketStrengthReacts quickly to paymentbehaviourUsed byCard issuers, consumerlenders, retailersExcelRoll rate modelTax BakersRoll rate analysis for ECLRoll rate: Share moving to the next bucket in a month; Loss rate: Product of roll rates to write-off; Data: Monthly balances by delinquency bucket; Strength: Reacts quickly to payment behaviour; Used by: Card issuers, consumer lenders, retailers; Excel: Roll rate model.KEY FACTS AT A GLANCERoll rate analysis for ECLRoll rateShare moving to the next bucket in a monthLoss rateProduct of roll rates to write-offDataMonthly balances by delinquency bucketStrengthReacts quickly to payment behaviourUsed byCard issuers, consumer lenders, retailersExcelRoll rate modelTax Bakers
Key facts at a glance, as set out in this guide.

How does roll rate analysis work?

How balances roll towards write-offHow balances roll towards write-off1Current8.1% roll onto 1-30 days21-30 days25.1% roll onto 31-60 days331-60 days40.4% roll onto 61-90 days461-90 days55.0% roll onto 91-120 days591-120 days70.4% arewritten off
Each month, a share of each bucket moves one step older.

Each month, unpaid balances age into the next bucket. If 1,000,000 is current at the end of one month and 80,600 is 1-30 days past due at the end of the next, the roll rate from current is 8.06%. The same calculation for every bucket, averaged over several months, describes how debts travel towards write-off. Roll rates are also called flow rates.

A roll rate analysis, worked through

A consumer lender has seven months of balances by delinquency bucket. Balance-weighted roll rates over the six transitions, and the cumulative loss rates they imply:

BucketRoll rate outCumulative loss rateBalance todayAllowance
Current8.06%0.316%1,040,0003,292
1-30 days25.11%3.928%79,9003,139
31-60 days40.43%15.646%19,8003,098
61-90 days55.00%38.704%9,4003,638
91-120 days70.37%70.370%3,8002,674
Total1,152,90015,841

The cumulative loss rate for current balances is 8.06% x 25.11% x 40.43% x 55.00% x 70.37% = 0.316%: a current balance is lost only if it rolls through every bucket. Balances already 91-120 days past due have a 70% chance of being written off next month. The Roll rate model (Excel) holds the monthly data and calculates every step.

What data does roll rate analysis need?

Month-end balances by delinquency bucket, consistently defined, and the amounts written off each month, ideally for at least 12 to 24 months. Balances must age one bucket per month for the method to work, so cures, partial payments and restructurings should be handled consistently: an account that pays its arrears moves back to current, which lowers the roll rate.

How many months of roll rates should be averaged?

Enough to smooth out seasonal swings, such as late payments after holidays, typically 6 to 12 months, but not so many that old behaviour dilutes recent changes. Some lenders weight recent months more heavily, or compare short and long averages to spot turning points.

How is roll rate analysis made forward-looking?

Roll rates describe recent behaviour, so they already respond to current conditions faster than annual loss rates. For forecasts, lenders scale the roll rates, often the early ones that are most sensitive to the economy, using the same link to unemployment or GDP as other models. The allowance sheet of the model has a scalar for this.

How do roll rates fit IFRS 9 staging?

For lenders using the general approach, roll rates can estimate 12-month or lifetime losses by bucket, and the buckets map to stages: current to stage 1, 31 to 90 days to stage 2 under the backstop, and over 90 days to stage 3. For trade receivables under the simplified approach, the cumulative loss rates are lifetime loss rates directly.

What are the limits of roll rates?

They assume the recent pattern continues; they need clean monthly data; and for products with long terms, such as mortgages, they capture short-term delinquency better than long-term default risk. See roll rates vs a provision matrix, migration matrices and historical loss rates.

Need help applying the standards?

Our Chartered Accountants help finance teams and students apply IFRS and US GAAP to real transactions.

Book a call Chat on WhatsApp

Questions people ask

What is roll rate analysis?

A method of estimating credit losses from the share of balances that move from one delinquency bucket to the next each month.

How do you calculate a roll rate?

Divide the balance in the next bucket at the end of this month by the balance in the current bucket at the end of last month.

How do roll rates become a loss rate?

The cumulative loss rate for a bucket is the product of its roll rate and every later roll rate through to write-off.

Who uses roll rate analysis?

Card issuers, consumer lenders and companies with many small customers, because it reacts quickly to payment behaviour.

Sources

Every fee, date and rule on this page was taken from these official and primary sources.

  1. IFRS Foundation: IFRS 9 Financial Instruments

Rules and fees change. If you are reading this long after October 4, 2026, confirm the figures with the source before you rely on them.

ECLRoll rates vs a provision matrixECLMigration matrices and transition ratesECLCalculating historical loss rates

More in ECL

Previous in this topicECL sensitivity analysisTopicAll 40 guides in ECL

This guide is general information. It is not tax or legal advice for your situation.