Featured Product

    CSSF Outlines Improvements Needed in Reporting of COVID-19 Data

    December 22, 2020

    CSSF issued a recommendation calling on management bodies of Luxembourg credit institutions to consider not distributing (or limiting) cash dividends, not conducting share buy-backs, and moderating variable remuneration payments (especially to material risk-takers) until September 2021. In this context, CSSF has updated the frequently asked questions (FAQs) on support measures issued in response to COVID-19 pandemic. Additionally, CSSF published the results of a thematic review of the information provided by 16 issuers on the impact of COVID-19 pandemic on their operations and financial performance as of June 30, 2020. CSSF has noted improvements that issuers should consider when preparing financial information in the future. The key improvements relate to the impairment of non-financial assets and the measurement and disclosure of expected credit losses (ECLs).

    The key topics covered under the thematic review were notably those identified in the ESMA public statement on the implications of COVID-19 outbreak on the half-yearly financial reports. These include disclosures reflecting significant uncertainties, going concern and risks linked to COVID-19; change in credit risk and impact on expected credit losses; impairment of non-financial assets; disclosure requirements related to the application of relief and support measures granted by public authorities; presentation of COVID-19 related items in the primary statements; and management reports and alternative performance measures. CSSF considers that there are several areas for improvement that issuers should consider when preparing their future financial information regarding the impact of this pandemic.

    The main issue encountered concerns the impairment of non-financial assets. It was observed that there was insufficient disclosure in the interim financial reports. Moreover, the assessments made by management with regard to the recoverable value of non-financial assets did not always appear consistent with the impact of the COVID-19 pandemic described elsewhere in the financial reports. Another improvement area concerns the measurement and disclosure of ECLs, especially on trade and lease receivables for corporates. A number of the issuers examined hold significant receivables for which the credit risk is likely to change, as their clients could be weakened by the effects of COVID-19 pandemic. As such, CSSF expects issuers to provide precise information on their credit risk management in response to COVID-19 and on any significant adjustments made to the impairment models as well as on the impairment losses recognized.

    Overall, CSSF expects issuers to provide, in their future financial reports, clear disclosures about how they have incorporated COVID-19 risks into their cash flow projections, discount rates, and long-term growth rates. Use of multiple scenarios is encouraged to better assess the recoverable values, despite the uncertainties related to the COVID-19 pandemic. In the near future, CSSF is expected to release priorities in relation to the enforcement of financial information for 2020 financial statements. In that context, and along with other priorities for the year, CSSF will focus on the information provided in relation to the effects of the COVID-19 pandemic on the operations, performance, financial position, and outlook of issuers.

     

    Related Links

    Keywords: Europe, Luxembourg, Banking, Securities, Thematic Review, Disclosure, ECL, Dividend Distribution, COVID-19, FAQ, Credit Risk, Accounting, CSSF

    Featured Experts
    Related Articles
    News

    BIS Examines Use of Big Data and Machine Learning at Central Banks

    BIS published a paper that provides an overview on the use of big data and machine learning in the central bank community.

    March 04, 2021 WebPage Regulatory News
    News

    APRA Finalizes Reporting Standard for Operational Risk Requirements

    APRA finalized the reporting standard ARS 115.0 on capital adequacy with respect to the standardized measurement approach to operational risk for authorized deposit-taking institutions in Australia.

    March 03, 2021 WebPage Regulatory News
    News

    ECB Publishes Guide for Determining Penalties for Regulatory Breaches

    ECB published a guide that outlines the principles and methods for calculating the penalties for regulatory breaches of prudential requirements by banks.

    March 02, 2021 WebPage Regulatory News
    News

    MAS Sets Out Good Practices to Manage Operational Risks Amid COVID

    MAS and The Association of Banks in Singapore (ABS) jointly issued a paper that sets out good practices for the management of operational and other risks stemming from new work arrangements adopted by financial institutions amid the COVID-19 pandemic.

    March 02, 2021 WebPage Regulatory News
    News

    ACPR Announces New Data Collection Application for Banks and Insurers

    ACPR announced that a new data collection application, called DLPP (Datalake for Prudential), for collecting banking and insurance prudential data will go into production on April 12, 2021.

    March 02, 2021 WebPage Regulatory News
    News

    BCB Maintains CCyB at 0%, Initiates First Cycle of Regulatory Sandbox

    BCB announced that the Financial Stability Committee decided to maintain the countercyclical capital buffer (CCyB) for Brazil at 0%, at least until the end of 2021.

    March 02, 2021 WebPage Regulatory News
    News

    EIOPA Launches Study on Non-Life Underwriting Risk in Internal Models

    EIOPA has launched a European-wide comparative study on non-life underwriting risk in internal models, also kicking-off of the data collection phase.

    March 01, 2021 WebPage Regulatory News
    News

    SRB Publishes Overview of Resolution Tools Available in Banking Union

    SRB published an overview of the resolution tools available in the Banking Union and their impact on a bank’s ability to maintain continuity of access to financial market infrastructure services in resolution.

    March 01, 2021 WebPage Regulatory News
    News

    EBA Consults on Pillar 3 Disclosure Standards for ESG Risks Under CRR

    EBA is consulting on the implementing technical standards for Pillar 3 disclosures on environmental, social, and governance (ESG) risks, as set out in requirements under Article 449a of the Capital Requirements Regulation (CRR).

    March 01, 2021 WebPage Regulatory News
    News

    ESAs Issue Advice on KPIs on Sustainability for Nonfinancial Reporting

    ESAs Issue Advice on KPIs on Sustainability for Nonfinancial Reporting

    March 01, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 6655