2005年-ECB欧洲央行_Main_Effects_from_the_New_Accounting_Framework_on_Banks_9页_138kb

Summary of the Main Effects of the New Accounting Framework on Banks

Core Content

The introduction of the new EU accounting framework, which requires all listed companies, including banks, to prepare consolidated financial statements in accordance with IFRS, is expected to enhance transparency and comparability across the EU. However, the first-time application of these standards will have significant effects on banks' financial statements, which must be carefully considered when interpreting accounting figures.

Main Areas of Impact

The following are the key areas where the new IFRS framework may affect banks:

1. Reclassification of Debt and Equity Instruments

• Debt Instruments: Certain instruments previously classified as equity (e.g., preference shares) may now be reclassified as liabilities if dividends are mandatory.
• Equity Instruments: Conversely, some liabilities may be reclassified into equity, reducing interest expenses.
• Impact: This reclassification may affect equity and net income, but regulatory capital (own funds) remains unaffected as it excludes intangible assets.

2. Accounting for Business Combinations

• Goodwill Measurement: Under IFRS 3, goodwill is calculated based on the fair value of assets and liabilities, rather than being amortised or written off immediately.
• Impact: This may lead to more volatile income and equity, but solvency ratios are not affected as goodwill is not risk-weighted.

3. Valuation of Financial Instruments

• Derivatives: Must be recognised on the balance sheet at fair value, leading to increased balance sheet size and income volatility.
• Available-for-Sale (AFS) Securities: Must be recorded at fair value, potentially increasing asset size and equity volatility.
• Hedging Provisions: Cash-flow hedges allow for deferral of gains and losses, but strict criteria may reduce the number of eligible hedges, increasing income volatility.
• Fair Value Option: Allows designation of financial assets or liabilities at fair value through profit and loss, which may reduce accounting mismatches and volatility.

4. Share-Based Payments

• Requirement: Banks must now recognise share-based payments at fair value in their income statements.
• Impact: This will result in a one-off negative effect on net income.

5. Allowances for Credit Losses

• New Rules: Require banks to assess and record impairment losses based on objective evidence of non-repayment.
• Impact: May reduce the level of allowances, leading to a positive impact on net income. However, this could also increase pro-cyclical effects on profit and loss.

6. Post-Employment Benefits

• Pensions: Recognised on the balance sheet only if the employer bears investment and actuarial risks.
• One-Off Effects: May lead to significant changes in liabilities and equity, depending on current recognition practices.
• Ongoing Effects: Increased volatility in profit and loss due to fair value measurement and regular actuarial updates.

7. Special Purpose Entities (SPEs)

• Recognition: SPEs used for securitisation may need to be consolidated or included in individual accounts, depending on control and risk exposure.
• Impact: May increase assets and liabilities, affecting return on assets and debt-to-equity ratios, but not solvency ratios due to prudential rules.

8. Dividend Adjustment

• Recognition Timing: Dividends are now only recognised when approved, not at declaration.
• Impact: Leads to a positive adjustment in equity for year-end accounts, which is temporary and corrected in interim accounts.

9. Software and Intangible Assets

• Capitalisation: Internally developed software and intangible assets must be capitalised and amortised if certain conditions are met.
• Impact: Increases asset size and equity but reduces income due to amortisation expenses.

Prudential Filters

To mitigate the impact of IFRS on regulatory capital, banking supervisors have introduced prudential filters. These filters are designed to maintain the definition and quality of regulatory capital and ensure consistency across EU and G10 countries. Key filters include:

• Own Credit Risk: Unrealised gains and losses from changes in the bank's credit standing are excluded from regulatory capital.
• Cash-Flow Hedges: Fair value reserves related to cash-flow hedges are not included in regulatory capital.
• Available-for-Sale Portfolio: Unrealised losses on equities are deducted from regulatory capital (tier one), while gains are partially included (tier two). For loans and receivables, unrealised gains and losses are not included in regulatory capital.

Key Considerations

• The overall impact on the banking sector depends on the composition and structure of each bank's balance sheet.
• Some national accounting rules are similar to IFRS, while others significantly differ.
• One-off effects may arise due to the transition from national to IFRS, affecting equity and income.
• Ongoing effects may lead to changes in the volatility and sensitivity of financial figures to market factors.
• Prudential reporting based on individual accounts may be less affected than consolidated reporting.

Conclusion

The transition to IFRS will bring about changes in the way banks report their financial statements, with potential effects on equity, net income, and balance sheet composition. However, regulatory capital and solvency ratios are generally protected through the use of prudential filters. The extent of these effects will vary depending on national rules, bank-specific practices, and market conditions. As a result, careful interpretation of financial indicators is necessary during the transition phase.