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20 December 2018

EBA provides preliminary assessment on post-implementation impact of IFRS 9 on EU Institutions

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This exercise is mainly based on data extracted from institutions' supervisory reporting. The initial observations from this exercise are consistent with the forecasts of the second EBA impact assessment report. The report also identifies some areas for ongoing scrutiny and further work from an EBA perspective.

The objective of this new Report on IFRS9 implementation is to provide preliminary observations on the first stages of implementation of IFRS9 while a deeper analysis is still ongoing.

Based on the data collected for the sample of banks, the actual negative day-one impact on CET1 (51 bps on simple average compared to 42 bps in the second impact assessment report from July 2017) and increase in provisions (9% on simple average compared to 13% in the second assessment report from July 2017) broadly confirm the previous estimations from the banks. In relation to the use of transitional arrangements mitigating the impact of IFRS9 on CET1 capital, the average CET1 impact resulting from the add-back of provisions for all the banks in the sample applying these transitional arrangements corresponds to 118 bps.

In addition, the EBA notes that the post-implementation review of IFRS9 is just starting and the effective impact of the standard, closely linked to the current and expected macroeconomic circumstances, as well as its implementation, will need to be reviewed through time. For this purpose, the EBA has developed a set of indicators using the supervisory reporting data that it intends to monitor on an ongoing basis.

The main observations from the report highlight some areas where the EBA thinks further scrutiny is necessary. These include better understanding the drivers for the observed impact on CET1, the quantitative and qualitative criteria used for transfers between stages as well as the use of IFRS 9 transitional arrangements.

Press release

Full report on observations


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