Implications of IFRS 9-based Multi-Year Risk Parameters for Bank Management
Implications of IFRS 9-based Multi-Year Risk Parameters for Bank Management

Author(s): Peter Haiss, Alexandra Brandstaedter
Subject(s): Business Economy / Management, Accounting - Business Administration
Published by: Masarykova univerzita nakladatelství
Keywords: IFRS 9; expected credit loss model; provisioning;
Summary/Abstract: What is the impact of the International Financial Reporting Standards 9 - based multi-year risk parameters on banks? We find that the main innovation brought on by IFRS 9 is a fundamental change of the risk assessment process. This process is based on the so-called Impairment Model and incorporates Expected Loss (EL) measures. Financial assets are allocated into assumed risk categories according to their estimated risk level. IFRS9 also requires immediate recognition of credit losses. Though intended to stabilize markets, this may have ambiguous effects. We argue that banks need to adapt not only risk management, but also lending processes accordingly.

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