IFRS 9 financial instruments
The impairment methodology is forward-looking, requiring the reporting entity to report the changes in credit risk of financial institutions in a consistent way with the credit risk measurement methods. Particularly, banks will move from 1 year EL to Lifetime EL.
Finalyse can assist you by bringing our expertise in Risk Management and the fields of Credit Risk Modelling, Accounting and Performance Measurement by implementing the 3-stage model in your computational and reporting streams, to fulfil IFRS 9 requirements in a timely manner.
How does Finalyse address your challenges?
Guidance in the implementation of the 3-stage model for impairments
Proven know-how in credit risk measurement and advanced modelling techniques delivered by seasoned experts
Common interpretation of methodology and guaranteed compliance
Assistance in building a robust reporting stream for the disclosures of your loan loss allowances
Assistance in choosing one of the three approaches that will differ in assessing impairment requirements
A full monitoring of IFRS 9 impacts for P&L and capital planning purpose
Key Features
- Finalyse would design an IFRS 9 framework catering to the bank’s needs comprising of a High-level gap report, Target Operating Model and an Impact Assessment.
- During the IFRS 9 implementation phase, Finalyse would focus on the different aspects of Impairment modelling and Expected Credit Losses (ECL) estimation. The classification and measurement of IFRS 9 instruments (as per the SPPI tests) and IFRS 9 Policy documents could also be reviewed/updated as part of this exercise.
- Finalyse would also support in the Business Transition phase and ensure the IT/Systems are fully integrated in the parallel run.
What Finalyse experts say
This expert input focuses on the validation of Expected Credit loss model validation; more specifically, it explains why it is a good idea now, after the scramble to have IFRS 9 compliant models in time, to consider validation. This input addresses the challenges of a methodological review of all models, and more specifically, it addresses the review of selected variables – macroeconomic factors, obligor characteristics, etc. It shows how to make the best use of the new ability to compare the outcomes of the models against the observed losses. In addition, this article tackles another challenge: the review of data quality – particularly of the modelling data set and new data.
ReadThis Expert input delves into the new EBA definition of default that will apply as of January 2021. It examines who is going to be most impacted by the change and what is going to be the difference in the impact on institutions that use the IRB approach versus institutions that use the Standardised approach. It looks at the most substantial changes in the new definition – like the differences in unlikeliness to pay, past due criterion and the criteria for return to the non-defaulted status. Lastly, it addresses briefly the challenges related to the use of external data – particularly for those institutions that use IRB only.
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