Banks look to repurpose credit risk models for IFRS 9

Dealers adapt capital models for new accounting standard, but shortcut has challenges

Bottle lamp
Existing credit risk models are being upcycled for IFRS 9 usage

Banks in the midst of implementing new accounting standards are looking to lighten the load by adapting their existing credit risk models for regulatory capital to calculate loan-loss provisions under International Financial Reporting Standard (IFRS) 9.

Set to be implemented in 2018, IFRS 9 introduces a new expected credit loss (ECL) regime for loans which will dramatically increase the reserves banks must hold against future losses. Dealers must calculate ECL for all loans over a 12-month

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