15 March 2016

EBF and ESBG respond to EBA consultation on FINREP using IFRS 9

EBF and ESBG comment on the EBA Consultation paper on Draft ITS amending Commission Implementing Regulation 680/2014 on supervisory reporting of institutions with regard to financial reporting following the changes in IFRS 9 Financial Instruments.

EBF

In EBF´s opinion, there are many examples of new data within the proposed templates that are not required by or not consistent with the requirements of IFRS 9 or IFRS 7 (as amended for IFRS 9). Taken collectively they present a considerable additional burden to the already demanding data and systems requirements needed to comply with IFRS 9.

- IFRS 7 does not require quantitative disclosure where there were significant concerns about banks being able to provide gross carrying amount information in a tabular form that reconciles to the balance sheet (IFRS 9 Basis for Conclusions BCE.166). In particular, the 12.2 requiring transfer information for gross carrying amount, creates a burden for preparers that is not justified with the objective of providing better information.

- Movements in allowances table (template 12.1): The production of a loss allowance movements table places high demands on finance and risk systems and having different prescribed headings between IFRS and FINREP is operationally onerous. In addition, the guidance in Annex V 131 on ‘changes due to origination and acquisition’ is too restrictive and does not take account of how revolving products should be treated.

- Requirement to separately disclose partial and total write offs directly to the P&L (template 4.4.1, 12.1): There is no requirement of IFRS 9/IFRS 7 to split partial and total write-offs. In addition, the definition of a ‘write-off’ is not aligned between IFRS 9 and FINREP. 

Full comment letter

ESBG

ESBG submitted this week its response to the EBA Consultation on the Guidelines for the implementation of the framework for consolidated financial reporting (FINREP) using IFRS 9. Made up of 21 specific questions regarding amendments to the FINREP templates, ESBG members compiled detailed, in-depth responses to these questions highlighting the practical issues that IFRS 9 would cause for reporters.​

The new FINREP IFRS 9 templates propose that two sets of definitions which do not match subsist while being difficult to reconcile. On one hand, the classification of financial instruments by stages is required, which seems reasonable as ESBG is adapting the templates to IFRS 9. However, on the other hand, it is also required that all the financial instruments and off-balance sheet exposures are classified by the performing or non-performing categories as per the EBA definitions. ESBG understands that the drivers which lead to this classification could be avoided in order to focus on the reporting of financial instruments by the IFRS 9 stages. To maintain a dual classification on a contract by contract basis would be costly, implying dual systems for accounting and classification, reconciliation procedures, allocation of allowances calculated by stages, etc. ESBG would recommend that the EBA adopt the full IFRS 9 definitions and adapt the reporting templates to the criteria included within the standard.

Full position paper