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The inputs and models used for calculating expected credit losses may not always capture all characteristics of the market at the date of the financial statements. Qualitative adjustments or overlays may be made for certain portfolios or geographies as temporary adjustments in circumstances where, in the Bank’s view, the inputs, assumptions, and/or modelling techniques do not capture all relevant risk factors, including the emergence of economic or geopolitical events, up to the date of the financial statements. As required under IFRS 9, the allowance for credit losses at each reporting period must be based on inputs, assumptions and information available up to that date.

The Bank has generated a forward-looking base case scenario and three alternative forward-looking scenarios (one optimistic and two pessimistic) as key inputs into the expected loss provisioning models. Given the uncertainty surrounding U.S. trade policies and the direction of tariffs, the scenarios as of April 30, 2026 have varying assumptions of imposed tariffs. The base case scenario assumes tariffs announced and implemented, avoiding speculation on future announcements, including potential trade deals and tariff pauses. Differing assumptions are reflected in the alternative scenarios described below. As new information comes to light in the future, the scenarios and assumptions will be updated accordingly.

The war in Iran since the end of February contributed to lift oil prices and uncertainty significantly, adding economic headwinds to those already generated by increased trade frictions imposed by the U.S. since early 2025. Our base case working assumptions are that the situation in the Middle East will start improving around mid-2026, and oil prices will start declining gradually thereafter, although expected to stay above previous baseline levels over the forecast period. The impact from this war on Canada’s economic activity is largely neutral as positive wealth inflows from its net oil exporter status, are offset by increased uncertainty and tighter financial conditions. In our current base case, Canada’s economic growth is expected to slow from 2025 to 2026 as the economy continues to adjust to the higher tariff landscape and softer economic and labour market conditions early in the year. Canada’s economy strengthens in 2027, supported by fading negative trade effects and fiscal policy initiatives, notably on defense and infrastructure. U.S. economic growth is also expected to slow modestly from 2025 to 2026 with reduced support to household and business expenditures from equity markets and weaker consumption from a soft labour market. Stronger inflation pressures in both economies, including from higher oil prices, are forecast to lead to a higher expected profile for their monetary policy rate in 2026, and also 2027 in the case of the U.S.

The optimistic scenario features somewhat stronger economic activity relative to the base case. The pessimistic scenario features a negative demand-type shock with globally tighter financial conditions, weaker growth and inflation, and lower monetary policy rates than in the base case scenario. It also assumes a combination of U.S. imposed tariffs on world economies, including an effective tariff

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on imports from Canada and Mexico, while facing no retaliation from these countries. The very pessimistic scenario features a strong stagflationary impulse that leads to a protracted period of financial market uncertainty. Ongoing geopolitical events in Iran also contribute to this stagflation impulse through higher prices for oil and other commodities. This scenario also assumes U.S. imposed tariffs with a magnitude about three times that of the pessimistic scenario. Under this scenario, all countries retaliate. This results in higher inflation, requiring central banks to raise their policy rates to higher levels than in the base case in order to bring inflation under control, which will dampen economic activity.