FSI of BIS published a paper on the identification and measurement of non-performing assets (NPAs). The paper focuses on the role that prudential regulation and supervision can play in facilitating the prompt identification and measurement of NPAs, by taking stock of cross-country practices.
The paper takes stock of NPA identification and measurement practices across select jurisdictions and identifies a number of regulatory and supervisory policy considerations that may be useful to supervisory authorities. It first outlines applicable accounting standards on NPA identification and measurement and summarizes the recent BCBS guidance on the prudential treatment of problem assets. Then, it discusses the key takeaways of the FSI survey on NPA identification and measurement practices across sampled jurisdictions. Next, the paper sets out policy options that supervisors may consider to enhance their NPA identification and measurement process. Finally, the paper provides brief concluding remarks, followed by an Annex that provides detailed information on NPA identification and measurement in the sampled countries.
The study reveals considerable differences across jurisdictions in the applicable accounting standards, which are exacerbated by divergent prudential frameworks that govern NPA identification and measurement. These differences make it difficult to make meaningful comparisons—both within and across jurisdictions—on key asset quality metrics, which are often a driver of a bank’s overall financial condition and operating performance.
Keywords: International, Banking, Accounting, NPLs, Identification and Measurement, Impairment, ECL, CECL, NPA, FSI, BIS
BCBS published a technical amendment to the capital treatment of securitizations of non-performing loans by banks.
BoE announced that the Data and Statistics Division is planning to move collection of statistical data to the BoE Electronic Data Submission (BEEDS) portal.
APRA published the updated reporting standards and guidance for the collection of Economic and Financial Statistics (EFS), following a consultation process. Also published was a response letter to the feedback received on the proposal for amending the EFS reporting standards and guidance.
EC is consulting on a draft delegated regulation to supplement the Taxonomy Regulation (2020/852) by establishing the technical screening criteria for determining the conditions under which an economic activity qualifies as environmentally sustainable.
The IFRS Foundation published material highlighting the ways in which existing requirements in IFRS standards require companies to consider climate-related matters when their effect is material to the financial statements.
EBA published a report analyzing the impact of the unwind mechanism of the liquidity coverage ratio (LCR) for a sample of European banks over a three-year period, from the end of 2016 to the first quarter of 2020.
In response to questions from a member of the European Parliament, the ECB President Christine Lagarde issued a letter clarifying the possibility of amending the AnaCredit Regulation and making targeted longer-term refinancing operations (TLTROs) dependent on the climate-related impact of bank loans.
IASB started the post-implementation review of the classification and measurement requirements in IFRS 9 on financial instruments and added the review as a project to its work plan.
FSB published a report that examines progress in implementing policy measures to enhance the resolvability of systemically important financial institutions.
EBA published a report on the benchmarking of national loan enforcement frameworks across 27 EU member states, in response to the call for advice from EC.