EBA欧洲银行-Letter-to-EFRAG-Board-on-IFRS-9-endorsement_10页_265kb

EBA's Views on the Adoption of IFRS 9 Financial Instruments

Core Content

The European Banking Authority (EBA) has expressed its views on the adoption of IFRS 9, which replaces IAS 39. The EBA supports the timely endorsement of IFRS 9 by the European Commission and its effective application on 1 January 2018. The EBA believes that IFRS 9 represents an improvement over IAS 39 in terms of accounting for financial instruments, particularly in the area of credit loss provisioning.

Main Views

• Support for IFRS 9: The EBA supports the endorsement of IFRS 9 due to its conceptual improvements, especially the expected credit loss model, which should lead to more timely recognition of credit losses.
• Prudential Alignment: The EBA acknowledges that the expected credit loss model aligns better with existing prudential practices for banks using an internal ratings-based (IRB) approach.
• Qualitative Assessment: Due to the lack of reliable quantitative data, the EBA has conducted a qualitative assessment of the impact of IFRS 9 on financial stability, investor and issuer behaviors, and the prudential regulatory framework.
• Single Effective Date: The EBA advocates for a single effective date for IFRS 9 across all EU banks on 1 January 2018 to ensure comparability and robust implementation.

Key Improvements of IFRS 9

• Classification and Measurement: IFRS 9 allows for better alignment with banks' business models and financial instrument characteristics. It removes the hold-to-maturity requirement and tainting rules, which made classification under IAS 39 more complex.
• Hedge Accounting: IFRS 9 introduces more principles-based general hedge accounting requirements, which are more aligned with risk management practices.
• Credit Loss Recognition: The expected credit loss model under IFRS 9 requires the use of forward-looking information and should result in earlier recognition of credit losses, thereby addressing the G20's concerns about 'too little, too late' credit loss recognition.

Impact on Financial Stability

• Timely Recognition of Credit Losses: The EBA believes that the expected credit loss model will contribute to financial stability by enabling banks to recognize credit losses earlier and more accurately.
• Transparency and Market Discipline: Additional disclosure requirements under IFRS 9 will enhance transparency and promote market discipline, which is beneficial for financial stability.
• Supervisory Reporting: The EBA is aware that the introduction of IFRS 9 will impact supervisory reporting requirements, including FINREP, and will assess necessary changes to reporting templates.

Interaction with Prudential Requirements

• Capital Treatment of Provisions: The capital treatment of impairment allowances differs between banks using the standardised approach (SA) and the IRB approach. The EBA notes that the regulatory framework may need to be revised to align with the changes introduced by IFRS 9.
• Prudential Filters: Under IFRS 9, financial assets classified in the fair value through other comprehensive income category will not be subject to prudential filters, which were previously applied to the Available-for-Sale category under IAS 39.
• Liquidity Buffer: The EBA notes that the liquidity buffer requirements may interact with the classification of assets under IFRS 9, but banks will still be able to classify some assets at amortised cost and others at fair value.
• Prudent Valuation Adjustments: The EBA has submitted a Regulatory Technical Standard (RTS) on prudent valuation adjustments, which may need to be revised in light of the changes introduced by IFRS 9.

Impact on Investor and Issuer Behaviors

• Early Stage Assessment: The EBA has not yet identified significant changes in investor and issuer behaviors due to the adoption of IFRS 9, as these impacts may not be visible until the Standard is fully implemented.
• External Factors: The EBA believes that other factors, such as market competition, regulation, and the state of the economy, may have a stronger influence on investor and issuer behaviors than the application of IFRS 9 itself.

Conclusion

The EBA supports the timely endorsement and application of IFRS 9 in the EU, recognizing its improvements in accounting for financial instruments and its potential to enhance financial stability. The EBA is also aware of the need for further analysis and possible regulatory adjustments to ensure the consistent and effective implementation of IFRS 9.