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ECB comments on IFRS 9 transition arrangements

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08 Jun 2017

The European Central Bank (ECB) has written a letter to the European Parliament regarding the impact of IFRS 9 'Financial Instruments' on capital ratios.

In its letter the ECB states that:

  • The ECB is of the view transitional arrangements towards the full application of IFRS 9 should not be at the discretion of credit institutions, but either mandatory or at the discretion of the competent authorities.
  • The ECB prefers a static approach, rather than the impact being recalculated at every reporting date during the transition period.
  • The ECP points out that the Basel standards would allow jurisdictions up to five years to complete the transition and do not allow neutralisation.
  • The ECB notes that it is also possible that the increase in provisions will be partially or even fully neutralised by other effects, such as changes in asset classification stemming from the general implementation of IFRS 9.

Please click to access the full letter on the ECB website.

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