Second EBA report on IFRS 9 implementation

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19 Nov, 2023

The European Banking Authority (EBA) has published a second report summarising the findings arising from the monitoring activities on the IFRS 9 implementation by EU institutions.

This second report complements the observations included in the first IFRS 9 monitoring report published in November 2021. It focuses on high default portfolios and aims to promote further improvements in the expected credit loss (ECL) model practices among EU institutions by providing transparency on the major areas of concern identified by the EBA.

The report states:

  • ECL models now lead to timelier recognition of loss provisions. However, most findings confirm previously raised issues and some divergence with the EBA’s expectations on IFRS 9 implementation.
  • Overlays are becoming an integral part of the ECL framework and therefore, more efforts are needed to reduce the high degree of judgment for their calibration. Their usage under robust methodological and sound governance frameworks needs to be better framed.
  • Backtesting is a key area that requires further investments by institutions to enlarge scope and robustness of the analysis and to improve the use of the backtesting results for the periodic review of IFRS 9 models.

Please click to access the full report on the EBA website.

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