IFRS 9 and the loan loss lottery

As reserves for bad loans balloon, banks grapple with measuring Covid-era credit risk

When global standard-setters were crafting their new accounting regime for expected credit losses, little did they know that an economic shock would turn the rules on their head so soon.

Under IFRS 9, banks must set aside provisions to cover losses over the life of a loan when the likelihood of default increases. The regime has a simple philosophy: when credit risk rises, loan reserves rise.

But the coronavirus crisis has prompted a rethink. Regulators in Europe and Asia are now pressuring

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Calibrating interest rate curves for a new era

Dmitry Pugachevsky, director of research at Quantifi, explores why building an accurate and robust interest rate curve has considerable implications for a broad range of financial operations – from setting benchmark rates to managing risk – and hinges on…

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