80% OF FIRMS ARE PLANNING TO USE EXISTING PD MODELS TO MEASURE SIGNIFICANT DETERIORATION
In July 2014, the International Accounting Standards Board (IASB) finalised a move to simplify the accounting rules for recognising and measuring financial instruments and replace the International Accounting Standard (IAS) 39 with the International Financial Reporting Standard (IFRS) 9. The goal was to address issues that arose during the financial crisis, such as delayed loan-loss provisioning.
IFRS 9 is effective from 1st January 2018 but investors and regulators will likely expect some disclosure of impairment on an expected credit loss (ECL) basis prior to the effective date. Banks must articulate the data requirements and the methodology now to allow enough time for model development, approval, implementation and parallel run before January 2018.
Parker Fitzgerald’s Joao Figueiredo explains “the scale of the task is not to be underestimated and can be compared to the effort required in the early days of Basel II and the implementation of