Publication date: 11 April 2017
EBF advisor: Denisa Mularova
The Basel Committee on Banking Supervision on 30 March published its standards for the interim approach and transitional arrangement for the regulatory treatment of accounting provisions. The BCBS standards leave considerable discretion to jurisdictions on the application of the transition period to mitigate the impact of IFRS 9 on capital. Find the BCBS paper on the standards at http://www.bis.org/bcbs/publ/d401.pdf.
As EBF has stated earlier, It is important that the European institutions clarify their approach for European banks as soon as possible. Without such clarity, banks will have to consider what commercial actions and reduction in lending to certain sectors of economy will have to take place to ensure that they are in a position to pass stress testing in 2018 under the new IFRS 9 accounting framework. At the same time it is important that the Basel Committee accelerates its discussions on interaction between the accounting and prudential regimes to address any potential overlaps to avoid capital being required for potential losses already covered by accounting provisions.
The EBF position on transition approach for IFRS 9 can be found here: