MAS Amends Notice 612 on ECL Recognition in Bank Financial Statements
MAS amended Notice 612, which takes effect on January 01, 2018 and replaces the version of the MAS Notice 612 dated March 11, 2005. This Notice requires banks to maintain proper credit files on all borrowers, conduct regular and systematic reviews of credit facilities, and grade them. The Notice also addresses the requirements for recognition of credit loss allowance for expected credit losses (ECL) in the financial statements of banks.
Under the Singapore Financial Reporting Standard (FRS) 109 on Financial Instruments, a bank shall recognize a loss allowance for expected credit losses (ECL) on selected financial assets. The loss allowance for credit exposures is measured at an amount equal to 12-month ECL if the credit risk on the credit exposure has not increased significantly since initial recognition. For credit exposures on which the credit risk has increased significantly since initial recognition, the loss allowance is measured at an amount equal to the lifetime ECL. ECL is measured on an individual or collective basis, taking into account all reasonable and supportable information, including that which is forward-looking.
As a transitional arrangement, where a locally incorporated domestic systemically important bank (D-SIB) does not maintain the 1% minimum collective impairment provisions required under MAS Notice 612 (dated March 11, 2005) as at December 31, 2017, the D-SIB shall comply with the requirements in paragraphs 6.3.7 and 6.3.8 of this Notice and establish the additional loss allowance within two years, commencing from the first annual financial reporting period beginning on or after January 01, 2018. This Notice applies to all banks in Singapore.
Effective Date: January 01, 2018
Keywords: Asia Pacific, Singapore, Banking, Accounting, ECL, IFRS 9, FRS 109, Credit Risk, MAS Notice 612, MAS
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