Featured Product

    BoM Issues Guidance on Capital Treatment of IFRS 9 Provisions

    January 13, 2021

    BoM published guidance on transitional arrangements for regulatory capital treatment of IFRS 9 provisions for expected credit losses. The transitional arrangements will allow banks and non-bank deposit-taking institutions (financial institutions) to add back a portion of their IFRS 9 provisions to the regulatory capital. These arrangements come into effect on January 13, 2021 and will phase out over a four-year period, with the transition factor turning zero from January 01, 2025 onward. A financial institution shall inform BoM about its decision to elect to apply the transitional arrangements no later than February 15, 2021. The introduction of these transitional arrangements is intended to alleviate the impact of the COVID-19 pandemic on the provisioning levels of financial institutions.

    The guidance stipulates that a financial institutions electing to apply the transitional arrangements will be required to make this disclosure this in the audited financial statements. A financial institution electing to apply the transitional arrangements shall refrain from paying dividends and making other transfers from profit until the end of the transitional period or until it opts out of the transitional arrangements. A financial institution shall add back a proportion of Stage 1 and Stage 2 provisions under IFRS 9 to its tier 1 capital. Banks shall add the provisions back to common equity tier 1 (CET1) capital and non-bank deposit-taking institutions shall add the provisions back to the tier 1 core capital. The amount of Stage 1 and Stage 2 provisions to be added back to the CET1 capital or the tier 1 core capital shall be calculated according to the formula set out in the guidance. Annex 1 to the guidance contains examples of calculation for the transitional arrangements.

    As per the guidance, Stage 1 and Stage 2 provisions that have been added back to the CET1 capital or the tier 1 core capital should not be included under tier 2 capital. Only the amount of Stage 1 and Stage 2 provisions not added back to the CET1 capital or the tier 1 core capital may be included in tier 2 capital, subject to the guidelines on scope of application of Basel III and the eligible capital and guidelines on capital adequacy ratio for non-bank deposit taking institutions. Financial institutions shall report the amount of provisions added back to the regulatory capital as well as the regulatory capital without applying the transitional arrangements. The reports shall be submitted on a quarterly basis, along  with the Returns on Statement of Capital Adequacy Calculation for banks and with the Returns on capital adequacy calculation for non-bank deposit taking institutions, as per the reporting template provided in Annex 2 for banks and in Annex 3 for non-bank deposit-taking institutions.

    During the transitional period, a financial institution may elect to opt out of the transitional arrangements but may not elect to apply the transitional arrangements again after opting out of it. A financial institution opting out of the transitional arrangements shall immediately inform BoM of its decision. These transitional arrangements are in line with the BCBS guidance from March 2017 and April 2020.

     

    Related Links

    Effective Date: January 13, 2021

    Keywords: Middle East and Africa, Mauritius, Banking, Accounting, ECL, Regulatory Capital, Transitional Arrangements, COVID-19, IFRS 9, Basel, BCBS, BoM

    Featured Experts
    Related Articles
    News

    EBA Clarifies Use of COVID-19-Impacted Data for IRB Credit Risk Models

    The European Banking Authority (EBA) published four draft principles to support supervisory efforts in assessing the representativeness of COVID-19-impacted data for banks using the internal ratings based (IRB) credit risk models.

    June 21, 2022 WebPage Regulatory News
    News

    EP Reaches Agreement on Corporate Sustainability Reporting Directive

    The European Council and the European Parliament (EP) reached a provisional political agreement on the Corporate Sustainability Reporting Directive (CSRD).

    June 21, 2022 WebPage Regulatory News
    News

    PRA Consults on Model Risk Management Principles for Banks

    The Prudential Regulation Authority (PRA) launched a consultation (CP6/22) that sets out proposal for a new Supervisory Statement on expectations for management of model risk by banks.

    June 21, 2022 WebPage Regulatory News
    News

    EC Regulation Amends Standards for Calculating Credit Risk Adjustments

    The European Commission (EC) published the Delegated Regulation 2022/954, which amends regulatory technical standards on specification of the calculation of specific and general credit risk adjustments.

    June 21, 2022 WebPage Regulatory News
    News

    HKMA Announces Launch of Data Repository on Sustainable Finance

    The Hong Kong Monetary Authority (HKMA) announced that the Green and Sustainable Finance (GSF) Cross-Agency Steering Group has launched the information and data repositories and outlined the progress made in advancing the development of green and sustainable finance in Hong Kong.

    June 21, 2022 WebPage Regulatory News
    News

    BIS Hub Updates Work Program for 2022, Announces New Projects

    The Bank for International Settlements (BIS) Innovation Hub updated its work program, announcing a set of projects across various centers.

    June 17, 2022 WebPage Regulatory News
    News

    EIOPA Issues Cyber Underwriting Proposal, Statement on Open Insurance

    The European Insurance and Occupational Pensions Authority (EIOPA) published two consultation papers—one on the supervisory statement on exclusions related to systemic events and the other on the supervisory statement on the management of non-affirmative cyber exposures.

    June 17, 2022 WebPage Regulatory News
    News

    NGFS Report on Integration of G-Cubed Model into NGFS Scenarios

    The Network for Greening the Financial System (NGFS) published a report that explores the feasibility of integrating the G-Cubed general equilibrium model into the NGFS suite of models.

    June 17, 2022 WebPage Regulatory News
    News

    US Senate Members Seek Details on SEC Proposed Climate Disclosure Rule

    Certain members of the U.S. Senate Committee on Banking, Housing, and Urban Affairs issued a letter to the Securities and Exchange Commission (SEC)

    June 16, 2022 WebPage Regulatory News
    News

    EIOPA Consults on Review of Securitization Framework in Solvency II

    The European Insurance and Occupational Pensions Authority (EIOPA) published a consultation paper on the advice on the review of the securitization prudential framework in Solvency II.

    June 16, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8301