Report on the financial stability implications of IFRS 9
27 Jul, 2017
The European Systemic Risk Board (ESRB) has published a report on the financial stability implications of IFRS 9 'Financial Instruments'. The ESRB’s work on this topic was requested by the European Parliament in January 2016.
The analysis in Financial stability implications of IFRS 9 focuses on two aspects:
- IFRS 9 and fair value accounting for the measurement of financial assets
- The new expected credit loss paradigm
The report notes:
The ESRB concludes that IFRS 9 represents a major improvement in comparison with IAS 39 and is expected to bring substantial benefits from a financial stability perspective. Together with the greater clarity and certainty associated with its principles-based approach to the classification and measurement of financial instruments, the earlier and fuller recognition of impairment losses under the new expected credit losses model is expected to have positive effects on financial stability.
The ESRB report is accompanied by an occasional paper Assessing the cyclical implications of IFRS 9 – a recursive model. This paper describes a model for assessing different approaches to the accounting of credit impairment losses. In particular, it compares the impact of a crisis on banks assuming four such different approaches, including the current approach in IAS 39 (incurred losses) and the solutions adopted under IFRS 9 and in the United States respectively.
Please click for the two reports on the ESRB website:
