EBA Assesses Post-Implementation Impact of IFRS 9 on EU Institutions
EBA published the initial observations on the post-implementation impact of IFRS 9 on banks in EU. This exercise, which builds on the two pre-implementation impact assessments published in November 2016 and July 2017, is mainly based on data extracted from supervisory reporting by institutions. The initial observations from this exercise are consistent with the forecasts of the second EBA impact assessment report.
The report on IFRS 9 implementation is intended to provide preliminary observations on the first stages of implementation of IFRS 9 while a deeper analysis is still ongoing. Based on the data collected for the sample of banks, the actual negative day-one impact on common equity tier 1, or CET 1, capital (51 bps on simple average compared to 42 bps in the second impact assessment report from July 2017) and increase in provisions (9% on simple average compared to 13% in the second assessment report from July 2017) broadly confirm the previous estimations from the banks. In relation to the use of transitional arrangements mitigating the impact of IFRS 9 on CET 1 capital, the average CET 1 impact resulting from the add-back of provisions for all the banks in the sample applying these transitional arrangements corresponds to 118 bps. The main observations from the report highlight some areas where the EBA thinks further scrutiny is necessary. These include better understanding the drivers for the observed impact on CET 1, the quantitative and qualitative criteria used for transfers between stages, and the use of IFRS 9 transitional arrangements.
EBA notes that the post-implementation review of IFRS 9 is just starting and the effective impact of the standard, closely linked to the current and expected macroeconomic circumstances, as well as its implementation, will need to be reviewed through time. Therefore, EBA has developed a set of indicators using the supervisory reporting data that it intends to monitor on an ongoing basis. EBA will carry out further work on IFRS 9 modeling aspects to better understand the practices followed by banks and to assess which aspects might merit further investigation. Greater attention may be given to banks under the standardized approach, given their lack of modeling experience. As a medium/long-term action, EBA will consider the possibility of conducting a benchmarking exercise, whose objective would be to understand to what extent the use of different methodologies, models, inputs, and scenarios could lead to material inconsistencies in the expected credit loss outcomes between banks. In addition, EBA will continue to closely monitor and follow up on the ongoing work, at the level of BCBS, on the interaction between accounting expected credit loss models and regulatory provisions.
Related Links
Keywords: Europe, EU, Accounting, Banking, IFRS 9, Expected Credit Loss, CET 1, Credit Risk, EBA
Related Articles
|
News
US Agencies Adopt Rule to Exclude Community Banks from Volcker RuleUS Agencies (CFTC, FDIC, FED, OCC, and SEC) adopted a final rule to exclude community banks from the Volcker Rule, in line with amendments to certain sections of the Economic Growth, Regulatory Relief, and Consumer Protection (EGRRCP) Act.
July 22, 2019
WebPage
Regulatory News
|
|
News
US Agencies Adopt Amendments to Simplify Regulatory Capital RulesUS Agencies (FDIC, FED, and OCC) adopted a final rule that reduces regulatory burden by simplifying several requirements in the regulatory capital rules for banks.
July 22, 2019
WebPage
Regulatory News
|
|
News
IA of Hong Kong Delegates Inspection and Investigation Powers to HKMAHKMA and IA of Hong Kong jointly issued a statement announcing the delegation of the inspection and investigation powers of IA to HKMA, pursuant to the statutory regulatory regime for insurance intermediaries under the Insurance Ordinance.
July 19, 2019
WebPage
Regulatory News
|
|
News
FSB Extends Implementation Timeline for Policy Recommendations on SFTsFSB announced adjustments to the implementation timelines for its recommendations on securities financing transactions (SFTs), specifically those related to the minimum haircut standards for non-centrally cleared SFTs.
July 19, 2019
WebPage
Regulatory News
|
|
News
EBA Single Rulebook Q&A: Third Update for July 2019EBA published answers to six questions under the Single Rulebook question and answer (Q&A) tool this week.
July 19, 2019
WebPage
Regulatory News
|
|
News
EBA Report Assesses Regulatory Framework for Fintech ActivitiesEBA published the findings of its analysis on the regulatory framework applicable to fintech firms when accessing the market.
July 18, 2019
WebPage
Regulatory News
|
|
News
OSFI Revises Capital Requirements for Operational Risk for BanksOSFI is revising its capital requirements for operational risk, in line with the final Basel III revisions published by BCBS in December 2017.
July 18, 2019
WebPage
Regulatory News
|
|
News
OSFI Consults on Revised Principles for Management of Liquidity RiskOSFI proposed revisions to Guideline B-6 on the principles for the management of liquidity risk.
July 18, 2019
WebPage
Regulatory News
|
|
News
ESMA Guidance on Disclosures for Credit Rating Sustainability IssuesESMA published the technical advice on sustainability considerations in the credit rating market, along with the final guidelines on disclosure requirements applicable to credit ratings.
July 18, 2019
WebPage
Regulatory News
|
|
News
FASB Issues Q&A on Estimation of Expected Credit Losses by FirmsFASB issued a second question-and-answer (Q&A) document that addresses more than a dozen frequently asked questions related to the Accounting Standards Update No. 2016-13 titled “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.”
July 17, 2019
WebPage
Regulatory News
|
