IFRS 9

Five modelling challenges in modern forecasting and stress testing

Five modelling challenges in modern forecasting and stress testing

Since the implementation of International Financial Reporting Standard (IFRS) 9, capital & impairment forecasting and stress testing has seen a sharp rise in complexity across the banking industry. 4most consultants have been working on projects dealing with Internal Capital Adequacy Assessment Process (ICAAP)…

The PRA’s thoughts on IFRS 9 - our comment

The PRA’s thoughts on IFRS 9 - our comment

On the 15th April the PRA wrote to the CFO’s of the top seven banks to give their initial opinions on the implementation of the new impairment requirements under IFRS 9. As expected for such a substantial subject, the findings, based on their written auditor reporting work, are varied in nature. Through discussion with a range of lenders and client engagements, we see many of the issues raised by the PRA. However, there are also some omissions that we expected to see.

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IFRS 9 Impairment Models - A regulatory cost or a business opportunity?

IFRS 9 Impairment Models - A regulatory cost or a business opportunity?

The financial services industry has recently undergone a major change due to the introduction of IFRS 9 impairment requirements. This has come generally at increased costs due to either the redirection of internal resource or engagement of third parties to develop compliant models.

Financial Regulation: 10 years from the crash, how are things different?

This March marks 10 years since the fire sale of Bear Stearns in 2008, a significant moment in the global financial crisis. This moment offers us an appropriate time to reflect and assess how the banking industry has changed in that time and learned from the mistakes of the past – and to consider what the future holds for the sector.

Bank of England stress test scenario and UK financial stability outlook

The Bank of England has today published the latest outlook from the Financial Policy Committee and outlined the scenario for 2018’s bank stress tests, providing us with an indication of its likely areas of focus in assessing UK financial stability.

4most comments on Bank of England’s stress test results

On 28th November, the Bank of England published the results from its 2017 stress tests, which provided an assessment of the stability of UK’s banking system.

The headlines show that the major UK banks have all passed the stress tests and are deemed strong enough to keep lending in a scenario more severe than that of the 2008 global financial crisis, which is good news for the sector.

IFRS 9 IMPAIRMENT MODELS

The financial services industry is currently busying itself with building models to predict the lifetime losses under the new IFRS 9 accounting standard, specifically for their stage 2 and stage 3 accounts. Generally, these are account level lifetime loss predictions with the ability to mechanically adjust to use probability weighted economic scenarios.

IFRS 9 stage 2: Dealing with lifetime expected losses and forward-looking adjustments

IFRS 9 (the new accounting standard) is fast approaching with many organisations already in full swing in terms of development and with their chasing pack firmly in the planning stages for design and build.  But just how ready are you for the impending changes?

IFRS 9 Benchmarking – more than a nice to have?

IFRS 9 is the new accounting standard from the International Accounting Standards Board for credit losses on portfolios of loans. It will come into effect in most jurisdictions for reporting periods starting January 2018. One of the key principles is that lenders should use relevant data that is reasonably available to assess the appropriateness of credit provisions.

Forecasting under IFRS 9 – Technical Challenges ahead

IFRS9 is the new accounting standard from the IASB for credit losses on portfolios of loans that is expected to come into effect in January 2018 across at least 96 of 174 jurisdictions around the globe. Work in many banks and lenders is well progressed towards meeting the reporting deadline. I will not repeat the considerations required in the building of a new provision process here as that has been well covered in many places previously. 

Banks cut budgets for maths and models as rules change

The FT covered a piece on a regulatory crackdown that it claims removes the key incentive for measuring risk – view the full article here https://next.ft.com/content/672e8d6a-1d63-11e6-b286-cddde55ca122  Here is our response - this certainly covers the impact for investment banks as rather than retail.  What BCBS have announced is that they are potentially withdrawing IRB treatments for exposures against large corporates and other banks.

IFRS 9 – The impact on collections strategy and performance

At this stage, most organisations are well on their way to coming up with a compliant solution for the new accounting standard IFRS9, which becomes mandatory on 1 January 2018. Management teams are also starting to understand the direct impact of IFRS9 to their profit and loss (P&L) and as a result, thought naturally leans towards the secondary impacts of the implementation of this regulation.

IFRS 9 - how to make the changes needed

The changes needed to meet the new IFRS 9 requirements are substantial and will require significant thought and effort by individual organisations and their advisors to develop a compliant solution that is right for them. Some larger, more complex and systemically significant organisations have been working on this for a number of years and still don’t have all of the answers