The New Impairment Model Under IFRS 9 and CECL
First published:
ISBN: 978-1-78272-347-9
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Technology Solutions for CECL and IFRS 9
Sidhartha Dash
Introduction
The New Era of Expected Credit Loss Provisioning
The Marking of CECL Standard: Comments and Reflections
Sources of Modelling Variation in CECL Allowances
A CRO’s Perspective: Implementing, Operationalising and Governing of IFRS 9
Implementing Both IFRS 9 and CECL
Macroeconomic Forecasting and Scenario Design for IFRS 9 and CECL
Technology Solutions for CECL and IFRS 9
Implementing IFRS 9: Quantifying Expected Credit Losses in Retail and Wholesale Portfolios
From Incurred Loss to CECL: Historical Perspectives and Practical Guidance
Loss Forecasting Retail and Commercial Portfolios for CECL
Implementing CECL at Small and Community Banks
The New Impairment Model: Audit and Disclosure Challenges
The New Impairment Model: Governance and Validation
The Impacts of CECL: Empirical Assessments and Implications
How the New Impairment Model Could Affect Banks’ Business Models
Measuring and Managing the Impact of New Impairment Models on Dynamics in Allowance, Earnings and Bank Capital
Integration into Regulatory Capital Frameworks
Implications for Equity and Debt Investors
INTRODUCTION AND OVERVIEW
IFRS 9 and CECL herald a fundamental shift in the impact and incidence of accounting regulations on banks’ technology and process environments, largely because both standards affect the core business and operations of banking. This chapter focuses on the broad shifts in technology that have been caused specifically by IFRS 9 and CECL but also more generally by a drift to a more risk-aware approach to accounting. The move towards risk-aware accounting requires an accompanying response from banks in the form of new technology architecture, data-management frameworks and computational tools (such as computing languages and algorithmic and data structure abstractions).
While historical shifts in accounting standards – such as hedge accounting or even credit valuation adjustment (CVA) calculations – have had significant consequences for specific technological components within banks, the impacts of IFRS 9 and CECL are more fundamental and far-reaching. Many banks have had to transform their IT systems and technology to address CECL and IFRS 9; most have faced some kind of adaptation. The changes have also forced them to enhance their credit risk systems –
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