Written by Chartis Research
International Financial Reporting Standard (IFRS) 9 introduced a new accounting standard for financial instruments when it came into effect in January 2018. Taking first place for helping customers solve challenges around IFRS 9 is Moody’s Analytics, winner of the inaugural RiskTech100 ® IFRS 9 award.
Roshni Patel, Moody's Analytics
“The way Moody’s Analytics approached IFRS 9, and particularly the impairments impact, made us stand out,” says Roshni Patel, Director and Senior IFRS 9 Specialist at Moody’s Analytics. She explains that Moody’s Analytics has created and offered an off-the-shelf solution that can be adapted and targeted for all tiers and segments of financial institutions, from Tier 1 to Tier 3 start-up banks.
For impairment – a key challenge of IFRS 9 – Moody’s Analytics provides a calculations model in its ImpairmentStudio solution, which also covers Current Expected Credit Loss impairment calculations. This is particularly important for regions and financial institutions that require dual reporting.
In general, firms have been able to combine elements of Moody’s Analytics’ offering with existing systems. Patel says that customers have the flexibility to not rely solely on the Moody’s Analytics IFRS suite. If their infrastructure includes existing data, models or applications, these can be embedded into the Moody’s Analytics IFRS 9 solution. For example, they can customize and input their own scenarios or leverage Moody’s Analytics’ parameters for benchmarking purposes.
As IFRS 9 is now in effect, industry focus has shifted to take projects to the next level. For those that started late and ended up with shortterm solutions with manual workarounds, the projects this year have been geared towards transforming these tactile deployments into more automated solutions. In many cases, Moody’s Analytics has seen emphasis on IFRS 9 validation frameworks and integration of IFRS 9 into business processes. Going forward, Patel says, it is about being able to use the same data across the business by linking IFRS 9 to integrated balance sheet management, origination and risk measurement, and “having a consistent platform where you have that one golden source of data”.
As part of strategic work being undertaken in the market, firms are increasingly assessing the impact IFRS 9 will have on their overall business strategies. Pricing of new deals is set to be affected by the outcome of future IFRS 9 calculations. The front office is therefore obliged to get up to speed with changes that could impact deal assessments and subsequent impacts on provisions.
Patel says Moody’s Analytics is helping clients understand credit earnings volatility of loan portfolios introduced by IFRS 9 and how to tame volatility from a risk management perspective. “The C-level has to be able to understand and justify what is causing the volatility,” she says.