CBUAE Provides Guidance on Application of IFRS 9 and TESS Facility
CBUAE issued guidance to financial institutions on the application of International Financial Reporting Standard (IFRS) 9, post a stakeholder consultation. The guidance is intended to ensure that credit losses resulting from the consequences of COVID-19 pandemic are appropriately calculated. IFRS 9 guidance proposes practical solutions to manage the impact of economic uncertainty on the estimation of expected credit losses, while remaining compliant with IFRS 9. The guidance also aims to ensure transparency and disclosures, contributing to strengthened financial stability in the UAE.
Additionally, CBUAE issued a notice that provides additional clarifications on deferral requests under the Targeted Economic Support Scheme (TESS) liquidity facility and aims to further facilitate implementation of the scheme, with the aim to encourage banks and finance companies to draw-down more from the TESS liquidity zero cost funding facility designated to be used by impacted private corporate customers, small and medium-size enterprises (SMEs), and individuals. Pursuant to the notice, all banks and finance companies are required to consider the specific circumstances of impacted borrowers to receive a deferral of repayment within the TESS, as options for granting deferrals include the following:
- Deferment of principal only, or
- Deferment of both interest/profits and principal repayment, or
- Deferment of interest/profits only
The notice highlighted that the most in-demand option will be for the deferment of both interest/profits and principal repayment, unless the circumstances of a borrower allow for accepting other options. CBUAE also welcomed initiatives taken by banks to support and relieve their impacted customers without drawing against the TESS program, which is available to them. In this notification, CBUAE has disclosed the list of banks that availed more than 50% of the allocated TESS liquidity facility, which aims to protect and support the impacted customers during such unprecedented times. To date, 77% has been drawn-down from the AED 50 billion liquidity facility within the Targeted Economic Support Scheme (TESS), equivalent to AED 38.5 billion of allocated funds.
Related Links
Keywords: Middle East and Africa, UAE, Banking, Credit Risk, ECL, IFRS 9, Liquidity Risk, TESS, COVID-19, CBUAE
Featured Experts
Metin Epözdemir
Metin Epözdemir helps European and African banks with design and implementation of credit risk, stress testing, capital management, and credit loss accounting solutions.
Masha Muzyka
CECL, IFRS 9, and IFRS 17 expert; credit risk and insurance risk specialist; strategic planning and credit analytics solutions consultant
Victor Calanog, Ph.D.
Leading economist; commercial real estate; performance forecasting, econometric infrastructure; data modeling; credit risk modeling; portfolio assessment; custom commercial real estate analysis; thought leader.
Related Articles
EC Adopts Financial Reporting Changes Arising from Benchmark Reforms
EC published Regulation 2021/25 that addresses amendments related to the financial reporting consequences of replacement of the existing interest rate benchmarks with alternative reference rates.
BIS Bulletin Examines Key Elements of Policy Response to Cyber Risk
BIS published a bulletin, or a note, that examines the cyber threat landscape in the context of the pandemic and discusses policies to reduce risks to financial stability.
HMT Updates List of Post-Brexit Equivalence Decisions in UK
HM Treasury, also known as HMT, has updated the table containing the list of the equivalence decisions that came into effect in UK at the end of the transition period of its withdrawal from EU.
EBA Issues Erratum for Technical Package on Reporting Framework 3.0
EBA published an erratum for technical package on phase 1 of the reporting framework 3.0.
APRA Publishes FAQ on Measurement of Credit Risk Weighted Assets
APRA updated a frequently asked question (FAQ), for authorized deposit-taking institutions, on the measurement of credit risk weighted assets.
EBA Publishes Risk Dashboard for Third Quarter of 2020
EBA published the quarterly risk dashboard, along with the results of the Risk Assessment Questionnaire survey among 60 banks and 15 market analysts.
ECB Analysis Shows Privacy as Biggest Concern in Use of Digital Euro
ECB concluded the public consultation on the introduction of a digital euro in EU.
ECB Finalizes Guide on Supervisory Approach to Bank Consolidation
ECB published a guide that sets out the supervisory approach to consolidation in the banking sector.
SRB Chair Outlines Work Priorities for 2021
The SRB Chair Elke König published an article setting out work priorities for 2021.
FDIC Selects Companies to Compete in Final Phase of Tech Sprint
FDIC has selected 11 technology companies—including BearingPoint, Fed Reporter, Inc, and S&P Global Market Intelligence, LLC—for inclusion in the third and final phase of the rapid prototyping competition.
