Basel set to decide on capital relief for accounting changes

Phase-in to IFRS 9 and Cecl needed to avert "a dramatic overnight drop in regulatory capital", say auditors

Step by step
In stages: some supervisors favour a managed implementation over several years

Banks are expecting regulators to finalise transitional rules that could dampen the capital impact of new accounting standards, which are widely expected to result in significantly higher loan-loss provisions.

The impending changes – contained in updated guidelines from the International Accounting Standards Board (IASB) and the US Financial Accounting Standards Board (FASB) – will require banks to use expected rather than incurred-loss models to estimate loan losses. The anticipated rise in

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Credit risk & modelling – Special report 2021

This Risk special report provides an insight on the challenges facing banks in measuring and mitigating credit risk in the current environment, and the strategies they are deploying to adapt to a more stringent regulatory approach.

The wild world of credit models

The Covid-19 pandemic has induced a kind of schizophrenia in loan-loss models. When the pandemic hit, banks overprovisioned for credit losses on the assumption that the economy would head south. But when government stimulus packages put wads of cash in…

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