EBA published the IFRS 9 roadmap, which provides a comprehensive overview of the planned monitoring activities on IFRS 9 implementation. EBA also launched an IFRS 9 benchmarking exercise on a sample of institutions, with the aim to analyze the modeling practices followed by institutions and how IFRS 9 implementation impacts the amount of expected credit losses (ECL) in terms of own funds and regulatory ratios.
EBA already conducted several exercises on the IFRS 9 impact on EU institutions and communicated preliminary observations on the first stages of implementation. In the roadmap, EBA clarifies its intention to continue to monitor and promote a consistent application of IFRS 9 and to work on the interaction with prudential requirements. The roadmap includes the different phases of this work from qualitative and quantitative perspectives and this work will take place in the coming months and years. While EBA has already communicated the rationale underpinning the qualitative monitoring, the purpose of this roadmap is to clarify further the next steps with regard to the quantitative monitoring. An important aspect of the quantitative monitoring is the use of selected indicators extracted from regulatory reporting.
Another major aspect of the quantitative monitoring is the benchmarking of the modeling techniques used by EU institutions for IFRS 9 purposes. The IFRS 9 benchmarking exercise represents an important step in the context of the ongoing quantitative monitoring activities. The focus of this exercise is to assess whether the use of different modeling techniques and inputs can lead to significant inconsistencies in terms of the ECL amount that directly impacts own funds and regulatory ratios. EBA will leverage on its experience and expertise on benchmarking of prudential models already gained by regulators and supervisors. During the first phase of the IFRS 9 benchmarking exercise, the objective is to collect information on modeling practices and to perform a first assessment on quantitative parameters to be reported by institutions. The sample of institutions is similar to the one used for the previous EBA reports on IFRS 9. EBA will continue to engage closely with all concerned stakeholders for the purpose of this exercise and more generally for the purpose of its monitoring work on IFRS 9 implementation.
Keywords: Europe, EU, Banking, IFRS 9, Expected Credit Loss, ECL, Credit Risk, Roadmap, IFRS 9 Benchmarking, EBA
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