The Financial Reporting Council (FRC) of the UK welcomed the report on recommendations for a comprehensive set of IFRS 9 expected credit loss (ECL) disclosures published by the Taskforce on Disclosures about Expected Credit Losses. The report presents the Taskforce's recommended disclosure requirements for ECL in a tabular format, along with the relevant IFRS disclosure requirements.
The report first sets out the disclosure principles used by the Taskforce in developing its recommendations as well as considerations applicable to all the recommended disclosures in respect of the scope, timing, frequency, location, and granularity. It then summarizes what the Taskforce views as the most important ECL considerations while explaining the related disclosures, why they matter to users, and where in the report the related recommendation can be found. As per the Taskforce, the most important considerations for ECL relate to policies and methodologies; alignment between accounting for credit losses and credit risk management activities; forward-looking information; movement and coverage across stages; changes in the balance sheet ECL estimate; credit risk profile; regulatory capital; governance and oversight; and measurement uncertainty, future economic conditions, and critical judgments and estimates. Finally, the report sets out the disclosure recommendations of the Taskforce in tabular format, along with the relevant IFRS disclosure requirements.
The ECL impairment model introduced by IFRS 9 will have a significant effect on how banks calculate loan-loss provisions. Given the complexity of these models and the high degree of management judgment involved in these calculations, high-quality disclosures are an essential element of successfully implementing this new requirement. These disclosures should, among other things, clearly set out the accounting judgments exercised by management and provide information about the estimation uncertainty inherent in the calculations. To facilitate the provision of high-quality disclosures, FRC, along with PRA and FCA, sponsored the Taskforce, which comprises preparers and users, to build on the existing disclosures in IFRS 7 and develop further guidance on high-quality disclosures about ECL. The report acknowledges that some of the recommendations are stretching and may require a number of years to be implemented.
Keywords: Europe, UK, Banking, Accounting, IFRS 9, ECL, Disclosures, Task Force, PRA, FCA, FRC
APRA updated the lists of the Direct to APRA (D2A) validation and derivation rules for authorized deposit-taking institutions, insurers, and superannuation entities.
EC adopted a package that includes the digital finance and retail payments strategies and the legislative proposals for regulatory frameworks on crypto-assets and digital operational resilience.
ECB published an opinion (CON/2020/22) on proposals for regulations amending the securitization framework of EU, in response to the COVID-19 pandemic.
FCA is consulting on its approach to the authorization and supervision of international firms operating in UK.
MAS published amendments to Notice 637 on the risk-based capital adequacy requirements for reporting banks incorporated in Singapore.
FCA announced that it will move firms to RegData from Gabriel in the coming months in stages, based on the reporting requirements of firms.
ISDA issued a letter to regulators to flag that it now expects the supplement to the 2006 ISDA Definitions and the Interbank Offered Rate (IBOR) Fallbacks Protocol to be effective around mid- to late-January 2021.
APRA has concluded its review of the comprehensive plans of authorized deposit-taking institutions for the assessment and management of loans with repayment deferrals.
ESAs (EBA, EIOPA, and ESMA) published the first joint report that assesses risks in the financial sector since the outbreak of the COVID-19 pandemic.
BoE and HM Treasury confirmed that the COVID Corporate Financing Facility (CCFF) will close for new purchases of commercial paper, with effect from March 23, 2021.