Featured Product

    FINMA Consults on Ordinance and Circular on Accounting for Banks

    March 18, 2019

    FINMA is consulting on the new FINMA Accounting Ordinance and the new Circular 20/xx titled “Accounting – banks," which sets out the current position of FINMA on certain accounting issues. The new ordinance contains the fundamental provisions on valuation and recognition. These documents replace the existing Circular 15/1 “Accounting – banks” and the associated frequently asked questions. FINMA is also consulting on revisions to Circular 2013/1 titled "Eligible equity capital – banks." The consultation will end on June 18, 2019. The new ordinance and circular are scheduled to enter into force on January 01, 2020, although the proposal provides for long transitional provisions.

    FINMA is making changes to content in the area of value adjustments. It is introducing a new approach for the creation of value adjustments for default risks, which takes into account the principle of proportionality based on the categorization of banks. FINMA is choosing a proportional, lean, and intentionally principles-based approach for the creation of value adjustments for default risks, which minimizes the weaknesses of the current system, in particular the procyclical effect caused by the late creation of value adjustments.

    This topic has also been dealt with in the international accounting standards: the new approach has already been applied in the IFRS provisions since 2018 and will be introduced in the U.S. GAAP from 2020. This affects banks that use these international standards for their accounting. The new body of rules for Switzerland applies to all banks and accounts that do not use such international accounting standards, however, and is significantly simpler and more principles-based by comparison.

    The rules are also proportional, which is to say that they take into account the categorization of institutions. In keeping with the international standards, systemically important banks (categories 1 and 2) must now apply an approach for expected losses and must form corresponding value adjustments. Medium-size banks (category 3), which operate primarily in the interest rate business, are now required to apply a simple, principles-based approach for quantifying inherent default risks in their credit portfolios and to create the corresponding value adjustments. The remaining banks and securities dealers can continue to apply the existing approach. The banks in categories 3, 4, and 5 as well as securities dealers may optionally apply an approach to form value adjustments for default risks of a higher category.

     

    Related Links

    Comment Due Date: June 18, 2019

    Effective Date: January 01, 2020

    Keywords: Europe, Switzerland, Banking, Securities, Accounting, Value Adjustments, Proportionality, SIB, Credit Risk, Expected Credit Loss, FINMA

    Featured Experts
    Related Articles
    News

    APRA Revises Related Entities Standard for Banks

    APRA published a strengthened prudential standard APS 222 on associations with related entities, with the aim to mitigate contagion risk within banking groups.

    August 20, 2019 WebPage Regulatory News
    News

    FSB on Responses to Consultation on Wind-Down of Trading Portfolios

    FSB published responses received to the consultation on the solvent wind-down of the derivatives and trading book portfolio of a global systemically important bank (G-SIB).

    August 19, 2019 WebPage Regulatory News
    News

    FSB Publishes Responses to Consultation on Resolvability Disclosures

    FSB published responses received to the consultation on disclosures for resolution planning and resolvability of banks.

    August 19, 2019 WebPage Regulatory News
    News

    HKMA Revises Implementation Schedule for Initial Margin Rules

    HKMA intends to adopt a revised implementation schedule for the margin requirements for non-centrally cleared derivatives.

    August 16, 2019 WebPage Regulatory News
    News

    HKMA Revises Guideline on Application of Banking Disclosure Rules

    HKMA issued a revised version of the Supervisory Policy Manual module CA-D-1 on guideline on the application of the Banking (Disclosure) Rules (BDR).

    August 16, 2019 WebPage Regulatory News
    News

    ECB Decision on Recognizing Reporting Member States Under AnaCredit

    ECB has finalized the Decision 2019/1348 (ECB/2019/20) that establishes procedure for recognizing non-euro area member states as reporting member states under the AnaCredit Regulation (EU 2016/867).

    August 16, 2019 WebPage Regulatory News
    News

    FASB Proposes to Extend CECL Standard Deadline for Certain Entities

    FASB proposed an Accounting Standards Update that would grant private companies, not-for-profit organizations, and certain small public companies additional time to implement FASB standards on current expected credit losses (CECL), leases, and hedging.

    August 15, 2019 WebPage Regulatory News
    News

    IASB Adds Phase Two of IBOR Reform to Its Work Plan

    IASB (or the Board) has added the second phase of its project focused on potential financial reporting implications linked to the interest rate benchmark reform—interbank offer rate (IBOR) reform—to its work plan.

    August 15, 2019 WebPage Regulatory News
    News

    FED Updates Draft Instructions for Proposed FR Y-14 Reporting Forms

    FED updated draft instructions for the monthly, quarterly, and annual capital assessments and stress testing reports, also known as forms FR Y-14M, FR Y-14Q, FR Y-14A, respectively.

    August 15, 2019 WebPage Regulatory News
    News

    FASB Proposes Taxonomy Changes Related to Topics 326, 815, and 842

    FASB is proposing taxonomy improvements for the proposed Accounting Standards Update on clarifying the interactions among topic 321 on investments in equity securities), topic 323 on investments under equity method and joint ventures), and topic 815 on derivatives and hedging.

    August 15, 2019 WebPage Regulatory News
    RESULTS 1 - 10 OF 3665