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BCBS has "not yet reached a conclusion" on IFRS 9

  • IFRS - Checklist Image

Mar 31, 2017

In March 2017, the Basel Committee on Banking Supervision (BCBS) released a statement on the interim regulatory treatment of accounting provisions and standards in view of the limited time until the effective date of IFRS 9 "Financial Instruments".

The statement stresses that the BCBS supports the use of expected credit loss (ECL) accounting approaches and encourages their application in a manner that will achieve earlier recognition of credit losses than incurred loss models while also providing incentives for banks to follow sound credit risk management practices. Still, the BCBS notes that the implementation of ECL accounting is likely to have fundamental implications for the regulatory capital and banks’ provisioning practices in qualitative and quantitative ways.

In view of the limited time until the effective date of IFRS 9 (January 1, 2018), the BCBS has therefore decided to retain the current regulatory treatment of provisions under the Basel framework for an interim period. In the meantime, the BCBS will thoroughly review the longer-term regulatory treatment of provisions. The statement also notes that jurisdictions may adopt transitional arrangements to smooth any potential significant negative impact on regulatory capital arising from the introduction of ECL accounting.

Review the BCBS statement on the Bank for International Settlements' (BIS) website.

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