Financial institutions are navigating through uncertain times. It is fair to say that significant lessons learned following the 2007-2008 global financial crisis have led to better management and control of capital and liquidity. The banking sector is not without its vulnerabilities, and systemically significant institutions must consider the risks that a shock like COVID-19 has had on financing the economy and compliant reporting of late.
Following the unprecedented effects of the ongoing pandemic, the International Financial Accounting Standards Board (IASB) and several prudential and securities regulators, such as the European Central Bank, published guidance on the International Financial Reporting Standard (IFRS) 9 for financial institutions. This guidance helps firms to produce reporting which is consistent and comparable across the banking sector, and will specifically aid institutions when accounting for expected credit losses (ECL). A key component of IFRS 9 is the impairment calculation, which must include forward-looking economic data in the calculation for ECLs and stage allocation for the generation of probability-weighted outcomes.
Discover the key considerations for banks by downloading this paper.
For more information on how Capco can support your business through COVID-19 and beyond, please contact Christine De Marco.