Featured Product

    EBA Assesses Post-Implementation Impact of IFRS 9 on EU Institutions

    December 20, 2018

    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

    Featured Experts
    Related Articles
    News

    ECB Finalizes Methodology to Assess CCR and A-CVA Risk of Banks

    ECB finalized the guide on assessment methodology for the internal model method for calculating exposure to counterparty credit risk (CCR) and the advanced method for own funds requirements for credit valuation adjustment (A-CVA) risk.

    September 18, 2020 WebPage Regulatory News
    News

    EBA Provides Opinion on Definition of Credit Institution in CRR

    EBA published an Opinion addressed to EC to raise awareness about the opportunity to clarify certain issues related to the definition of credit institution in the upcoming review of the Capital Requirements Directive and Regulation (CRD and CRR).

    September 18, 2020 WebPage Regulatory News
    News

    APRA Consults on Alignment of Daily Liquidity Report for Banks

    APRA is consulting on updates to ARS 210.0, the reporting standard that sets out requirements for provision of information on liquidity and funding of an authorized deposit-taking institution.

    September 17, 2020 WebPage Regulatory News
    News

    FED Releases Scenarios for Second Round of Stress Tests on Banks

    FED released hypothetical scenarios for a second round of stress tests for banks.

    September 17, 2020 WebPage Regulatory News
    News

    PRA Announces Update on Supervisory Benchmarking Portfolio Exercise

    PRA published updates in relation to the 2021 Supervisory Benchmarking Portfolio exercise.

    September 14, 2020 WebPage Regulatory News
    News

    FED Revises and Extends Capital Assessment and Stress Testing Reports

    FED adopted a proposal to extend for three years, with revision, the capital assessments and stress testing reports (FR Y-14A/Q/M; OMB No. 7100-0341).

    September 14, 2020 WebPage Regulatory News
    News

    HKMA Updates Policy Module for Non-Centrally Cleared OTC Derivatives

    HKMA revised the Supervisory Policy Manual module CR-G-14 on margin and other risk mitigation standards for non-centrally cleared over-the-counter (OTC) derivatives transactions.

    September 11, 2020 WebPage Regulatory News
    News

    EBA Updates List of Validation Rules for Reporting by Banks

    EBA issued a revised list of validation rules with respect to the implementing technical standards on supervisory reporting.

    September 10, 2020 WebPage Regulatory News
    News

    EBA Responds to EC Call for Advice to Strengthen AML/CFT Framework

    EBA published its response to the call for advice of EC on ways to strengthen the EU legal framework on anti-money laundering and countering the financing of terrorism (AML/CFT).

    September 10, 2020 WebPage Regulatory News
    News

    NGFS Advocates Environmental Risk Analysis for Financial Sector

    NGFS published a paper on the overview of environmental risk analysis by financial institutions and an occasional paper on the case studies on environmental risk analysis methodologies.

    September 10, 2020 WebPage Regulatory News
    RESULTS 1 - 10 OF 5803