November 24, 2017

ECB published a thematic report that assesses the preparedness of institutions for implementation of IFRS 9. The report also outlines key supervisory expectations for the ongoing implementation and application of IFRS 9. The supervisory expectations considered in this thematic review are consistent with the international best practices and supervisory guidance issued by BCBS and EBA. IFRS 9 replaces IAS 39 and enters into force on January 01, 2018.

This report presents the first quantitative and qualitative results of the thematic review on IFRS 9 for significant institutions (Sis) and less significant institutions (LSIs) within the Single Supervisory Mechanism, or SSM, framework. The scope of this supervisory exercise encompasses 106 SIs that prepare their financial statements in accordance with IFRS at the highest level of consolidation and are directly supervised by ECB. Additionally, the thematic review for LSIs was performed on a sample of 77 institutions in close collaboration between ECB Banking Supervision and the national competent authorities. This thematic review is a further step toward the consistent implementation of the IFRS 9 standard across banks in the euro area.

Overall, the review concludes that, for some institutions, there is still room for improvement if a high-quality implementation of IFRS 9 is to be achieved. Supervisors have noted that the largest SIs are more advanced in their preparation than the smaller SIs. The aspect considered to be the most challenging is impairment measurement, which requires significant changes to the institutions’ internal processes and systems. However, institutions also encountered challenges with the classification and measurement of financial instruments. In many cases there is still room for aligning the accounting definitions with the regulatory definitions. Furthermore, institutions are still in the process of incorporating the EBA guidelines on ECL into their policies and procedures. Results of the thematic review were considered in the Supervisory Review and Evaluation Process (SREP) 2017. Based on information reported by banks under direct ECB supervision that were better prepared in the first quarter of 2017 to implement IFRS 9 (and thus provided the most reliable data), the fully loaded average negative impact on the regulatory common equity tier 1 (CET1) ratio is estimated to be 40 basis points. From the data reported by the LSIs that were better prepared in the first quarter of 2017, the fully loaded average negative impact on the regulatory CET1 ratio is estimated to be 59 basis points. 

 

Related Links

Keywords: Europe, EU, Banking, IFRS 9, SI, LSI, SSM, SREP, ECB

Related Articles
News

FSB to Evaluate Effects of Too-Big-To-Fail Reforms for Systemic Banks

FSB is seeking feedback as part of its evaluation of the effects of the too-big-to-fail reforms for banks.

May 23, 2019 WebPage Regulatory News
News

APRA Releases Minor Changes to Reporting Standards on SA-CCR for Banks

APRA released minor changes to the three reporting standards for the standardized approach for measuring counterparty credit risk exposures (SA-CCR).

May 22, 2019 WebPage Regulatory News
News

APRA on Industry Self-Assessments into Governance and Accountability

APRA released an information paper analyzing the self-assessments performed by 36 of the country’s largest banks, insurers, and superannuation licensees in response to the final report on the Prudential Inquiry into the Commonwealth Bank of Australia (CBA).

May 22, 2019 WebPage Regulatory News
News

PRA Consults on Maintenance of TMTP Under Solvency II

PRA published a consultation paper (CP11/19) that sets out its approach to update supervisory statement (SS6/16) on maintenance of the transitional measure on technical provisions (TMTP) under Solvency II.

May 22, 2019 WebPage Regulatory News
News

APRA Proposes to Amend Guidance on Residential Mortgage Lending

APRA is consulting on revisions to the prudential practice guide APG 223 on residential mortgage lending in Australia.

May 21, 2019 WebPage Regulatory News
News

IASB Proposes Improvements to IFRS 9 and IFRS 16

IASB published the exposure draft ED 2019/2 that proposes amendments to four IFRS standards, including IFRS 9 on Financial Instruments and IFRS 16 on Leases.

May 21, 2019 WebPage Regulatory News
News

Denis Beau of BDF on Supervisory Priorities for Climate-Change Risks

Denis Beau, the First Deputy Governor of BDF, delivered opening remarks at the BCBS-BSCEE-FSI High-level Meeting for Europe on banking supervision.

May 21, 2019 WebPage Regulatory News
News

ISDA CDM to be Deployed for UK Digital Regulatory Reporting Pilot

ISDA announced deployment of the ISDA Common Domain Model (ISDA CDM 2.0) to support the UK FCA, BoE, and participating financial institutions in testing phase two of the Digital Regulatory Reporting pilot for derivatives.

May 21, 2019 WebPage Regulatory News
News

MAS to Consolidate Regulation of Merchant Banks Under Banking Act

MAS published a consultation paper that proposes to consolidate the regulation of merchant banks under the Banking Act and to move merchant banks to a licensing regime under the MAS Act.

May 21, 2019 WebPage Regulatory News
News

ESAs Amend Technical Standards on Mapping of ECAIs Under CRR

ESAs published a second amendment to the implementing technical standards on the mapping of credit assessments of External Credit Assessment Institutions (ECAIs) for credit risk under the Capital Requirements Regulation (CRR).

May 20, 2019 WebPage Regulatory News
RESULTS 1 - 10 OF 3118