October 25, 2017

PRA issued a clarification on how firms should incorporate IFRS 9 into stress testing and capital planning, which are conducted out as part of their Internal Capital Adequacy Assessment Process (ICAAP) obligations from 2018. This is only applicable to firms to which CRD IV applies and to firms that apply any of IFRS, FRS 101, or FRS 102 and have opted to use IFRS 9 for their financial instruments, in relation to ICAAP based on accounts as at December 31, 2017 or a later date.

In due course, PRA intends to publish additional clarification for firms participating in the Concurrent Stress Testing. For ICAAP documents based on accounts as at December 31, 2017 or a later date, PRA expects the firms in scope to prepare their ICAAP on an IFRS 9 basis. IFRS 9, which was issued in July 2014, replaces IAS 39. Following its endorsement for use in the EU, IFRS 9 is effective for annual periods beginning on or after January 01, 2018. The most significant change for banks and building societies relates to the introduction of a forward-looking expected credit loss model.

 

Related Link: Notification

Keywords: Europe, UK, Banking, Reporting, CRD IV, 2018 ICAAP, IFRS 9, Stress Testing, PRA

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