Mise en oeuvre de l’IFRS 9 (uniquement en anglais)

The new international financial reporting standard IFRS 9 Financial Instruments has been published by the International Accounting Standards Board (IASB) in July 2014 and is currently in the process of being endorsed at the level of the European Commission. IFRS 9 will be applicable from 1 January 2018 for all credit institutions under Luxembourg law and all branches of EU and non-EU credit institutions in their prudential reporting FINREP and for the banks publishing their accounts under IFRS.

In this context, the CSSF would like to draw the attention to the European Banking Authority’s (EBA) public consultation on the changes to FINREP templates due to the introduction of IFRS 9 which can be accessed by the following link: http://www.eba.europa.eu/-/eba-launches-consultation-on-finrep-using-ifrs-9. The CSSF intends to issue a corresponding circular once this document is finalised. That same circular will also introduce a reconciliation table showing the effect of IFRS 9 between the FINREP figures as at 31 December 2017 and 1 January 2018.

Further, the CSSF would like to inform that the Basel Committee for Banking Supervision (BCBS) has published a new ‘Guidance on Credit Risk and Accounting for Expected Credit Losses’ on 18 December 2015. This document enhances and supersedes the BCBS’ former guidance ‘Sound credit risk assessment and valuation for loans’ (2006). Further, the CSSF would like to inform that the Basel Committee for Banking Supervision (BCBS) has published a new ‘Guidance on Credit Risk and Accounting for Expected Credit Losses’ on 18 December 2015. This document enhances and supersedes the BCBS’ former guidance ‘Sound credit risk assessment and valuation for loans’ (2006).

This guidance describes supervisory expectations regarding sound credit practices together with the implementation and appropriate application of expected credit loss (ECL) models, resulting in adequate allowances in accordance with the relevant accounting framework. It is consistent with resolving the weakness identified during the recent financial crisis that credit loss recognition was too little, too late and the April 2009 call by G20 Leaders for accounting standard setters to ‘strengthen accounting recognition of loan loss provisions by incorporating a broader range of credit information’. The guidance focuses in particular on those aspects of IFRS 9 that imply a high level of judgement, such as:

• the integration into ECL measurement of forward-looking information and macro-economic factors,
• the assessment of a significant increase in credit risk (which triggers the measurement of provisions on a ‘lifetime’ basis),
• the limited use of practical expedients/simplifications by banks.

The document can be accessed by the following link:  http://www.bis.org/bcbs/publ/d350.htm

The CSSF would like to highlight that the EBA is currently working on similar guidelines meant to replicate the content of the BCBS’ document. The CSSF intends to issue a circular once this document is finalised.

The CSSF is also considering to perform at a later stage a qualitative and quantitative survey among banks to assess the impact of IFRS 9.