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June 3, 2019

EBA annual report updates on IFRS 9 progress

The European Banking Authority’s (EBA), the EU regulatory agency for banks, has published its latest annual report. Included in the report is an update on the implementation of International Financial Reporting Standard (IFRS) 9, which addresses the accounting of financial instruments.

In December 2018, the annual report notes the EBA published its first observations on the impact and implementation of IFRS 9 by EU institutions based on the impact arising from actual data reported by a sample of approximately 50 European Economic Area (EEA) banks.

According to the data collected, the simple average impact arising from the implementation of IFRS 9 on the CET1 ratio (51 basis points (bps)) and the simple average increase in provisions (9%) broadly confirmed the estimations received from banks during pre-implementation exercises conducted by the EBA.

The annual report adds that the EBA also continued other work on issues arising from the application of IFRS 9 in the EU banking sector. In particular, this included the publication of a number of Q&As on the application of the IFRS 9 transitional arrangements in the EU.

In addition to the work on IFRS 9 modelling aspects, specific areas of planned further work include analyses of the effectiveness of the EBA guidelines for communication between supervisors and auditors in the context of IFRS 9 and of the EBA guidelines on expected credit losses. In addition, the EBA will continue to monitor other issues such as the application of the IFRS 9 transitional arrangements in the EU.

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