We Need to Talk About IFRS 9: Regulatory Overlays to ECL Provisioning in the Time of COVID-19

The SEACEN Centre and Glenn Tasky

in Policy Briefs from South East Asian Central Banks (SEACEN) Research and Training Centre

Abstract: This issue, We Need to Talk About IFRS 9: Regulatory Overlays to ECL Provisioning in the Time of COVID-19 authored by Glenn Tasky, SEACEN’s Director of Financial Stability and Supervision / Payment and Settlement Systems, analyses the difficulties of applying the expected credit loss methodology during a pandemic. The Policy Analysis builds the case that IFRS 9’s impairment accounting principle is not fit for purpose in the present crisis period, but with some simple regulatory overlays that do not contradict the standard, regulatory authorities (central banks and stand-alone banking supervision authorities) can promote greater ease and consistency in applying the standard to determine necessary loan-loss allowances. In turn, more consistency across banks in the same jurisdiction, and more consistency across jurisdictions, can lead to better data and perhaps more effective supervisory judgment in tackling the expected increase in non-performing loans as a result of the pandemic.

Date: 2020
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