The New Impairment Model Under IFRS 9 and CECL
First published:
ISBN: 978-1-78272-347-9
If you are a Risk.net subscriber you are entitled to 20% off your Risk books purchases. Please email enquiries@riskbooks.com for more information.
As part of your Risk.net subscription you are entitled to 20% off all of your Risk Books purchases. If you would like to place an order please email enquiries@riskbooks.com
Implementing IFRS 9: Quantifying Expected Credit Losses in Retail and Wholesale Portfolios
Juan M Licari and Yashan Wang
Implementing IFRS 9: Quantifying Expected Credit Losses in Retail and Wholesale Portfolios
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
This chapter discusses how to address the specific challenges IFRS 9 poses for retail and wholesale portfolios, focusing on incorporating forward-looking information into impairment models, recognising significant credit-risk increases for stage allocation purposes and capturing an exposure’s lifetime. We also describe various practical and effective approaches for leveraging internal and external data for building impairment models and processes in line with IFRS 9 guidelines. We then answer common questions pertaining to consumer and commercial credit portfolios.
The new international accounting standard, IFRS 9, requires measuring and reporting financial assets from a more point-in-time (PIT) and forward-looking perspective, when compared with IAS 39’s incurred-loss model. At the core of this new requirement is the need to measure credit impairment in an objective and unbiased manner, using information regarding past events, current conditions and economic forecasts. This chapter focuses on quantifying loss allowance for wholesale and retail portfolios under IFRS 9. We discuss key components in the expected credit losses (ECLs) quantification: probability of
Copyright Infopro Digital Limited. All rights reserved.
As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (point 2.4), printing is limited to a single copy.
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (clause 2.4), an Authorised User may only make one copy of the materials for their own personal use. You must also comply with the restrictions in clause 2.5.
If you would like to purchase additional rights please email info@risk.net
