February 2019

The new accounting standards can have material implications for allowance and earnings dynamics. Join our researchers, Amnon Levy and Pierre Xu, explore a large sample of banks to better understand channels by which the standards affect shareholder value.

Webinar Highlights: 

  • Understand the impact of IFRS 9 and CECL on earnings volatility
  • Explore the relationship between bank’s equity valuation and earnings volatility 
  • Evaluate credit portfolio management techniques that can reduce earnings volatility and increase valuation

Click here for the presentation

Related Articles
Whitepaper

Earnings Volatility, Share Price Performance, and Credit Portfolio Management Under CECL and IFRS 9

This paper studies how earnings volatility induced by credit risk can impact share price performance for financial institutions under CECL and IFRS 9, and quantifies the benefit of an active credit risk management practice.

April 2019 WebPage Dr. Amnon Levy, Xuan Liang, Dr. Pierre Xu

Moody's Analytics Webinar: Credit Earnings Volatility and Share Price Performance: Implications of IFRS 9 and CECL

Join us as our experts, Amnon Levy, Managing Director, Pierre Xu, Director, and Anna Krayn, Senior Director, explore the relationship between share price performance and earnings volatility and the implications for credit portfolio management.

February 25, 2019 WebPage Dr. Amnon Levy, Dr. Pierre Xu, Anna Krayn

Moody's Analytics Sponsorship: SFIG Vegas 2019

Moody’s Analytics Sponsorship: SFIG Vegas 2019

February 24, 2019 WebPage

Moody's Analytics Sponsorship: CLO Summit 2018

Moody's Analytics is pleased to be a sponsor and exhibitor at the Opal Summit CLO Conference in Dana Point, California

November 28, 2018 WebPage
Whitepaper

A Composite Capital Measure Unifying Business Decision Rules in the Face of Regulatory Requirements Under New Accounting Standards

This paper introduces an approach that quantifies the additional capital buffer an institution requires, beyond the required regulatory minimum, to limit the likelihood of a capital breach.

May 2018 WebPage Dr. Amnon Levy, Xuan Liang, Dr. Pierre Xu
Whitepaper

A Composite Capital Measure Unifying Business Decision Rules in the Face of Regulatory Requirements Under New Accounting Standards

Prudent credit risk management ensures institutions maintain sufficient capital and limit the possibility of a capital breach. With CECL and IFRS 9, the resulting trend toward greater credit earnings volatility raises uncertainty in capital supply, ultimately causing an increase in required capital. It is ever more challenging for institutions to manage their top-of-the house capital while steering their business to achieve the desired performance level. This paper introduces an approach that quantifies the additional capital buffer an institution requires, beyond the required regulatory minimum, to limit the likelihood of a capital breach. In addition, we introduce a new measure that allocates capital and recognizes an instrument's regulatory capital requirements, loss allowance, economic concentration risks, and the instrument's contribution to the uncertainty in capital supply and demand. In-line with the Composite Capital Measure introduced in Levy and Xu (2017), this extended measure includes far-reaching implications for business decisions. Using a series of case studies, we demonstrate the limitations of alternative measures and how institutions can optimize performance by allocating capital and making business decisions according to the new measure.

May 2018 Pdf Dr. Amnon Levy, Xuan Liang, Dr. Pierre Xu
Webinar-on-Demand

CECL: Adapting to Adopt

Our subject matter experts, Chris Henkel, Senior Director, and Anna Krayn, Senior Director, discuss critical steps in meeting the new CECL standard.

April 2018 WebPage Christian HenkelAnna Krayn
Presentation

CECL: Adapting to Adopt

Our subject matter experts, Chris Henkel, Senior Director, and Anna Krayn, Senior Director, discuss critical steps in meeting the new CECL standard.

April 2018 Pdf Christian HenkelAnna Krayn
Whitepaper

Measuring and Managing the Impact of IFRS 9 and CECL Requirements on Dynamics in Allowance, Earnings, and Bank Capital

This paper explores how CECL and IFRS 9 might impact loss allowance, earnings, and capital dynamics, and how these dynamics might affect credit portfolio management.

April 2018 WebPage Dr. Amnon LevyDr. Jing Zhang
Whitepaper

Measuring and Managing the Impact of IFRS 9 and CECL Requirements on Dynamics in Allowance, Earnings, and Bank Capital

Reserving for loan loss is one of the most important accounting aspects for banks. Its objective is to cover estimated losses on impaired financial instruments due to defaults and non-payment. Reserve measurement affects both the balance sheet and income statement. It impacts earnings, capital, dividends and bonuses, and attracts the attention of bank stakeholders ranging from the board of directors and regulators to equity investors. In response to the so-called “too-little, too-late” problem experienced with loan loss reserve during the Great Financial Crisis, accounting standard setters now require that banks provision against loan loss based on expected credit losses (ECL). Arguably, calculating the Expected Credit Loss Model under IFRS 9 and CECL presents a momentous accounting change for banks, with the new standards coming into effect sometime between 2018 and 2021, depending on the jurisdiction.

March 2018 Pdf Dr. Amnon LevyDr. Jing Zhang
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