Does IFRS 9 Increase Volatility of Loan Loss Provisions?

Oľga Pastiranová () and Jiří Witzany
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Oľga Pastiranová: Prague University of Economics and Business

Chapter Chapter 19 in Regulation of Finance and Accounting, 2022, pp 243-249 from Springer

Abstract: Abstract This paper presents the main principles of the IFRS 9 accounting standard, which requires banks to estimate expected credit losses since 2018. The new standard is expected to change the flow of loan loss provisions, which are expected to be unstable, more volatile, and much more unpredictable than under the previous standard IAS 39, empirically tested on a sample of eight largest Czech banks according to their balance sheet volume. The hypothesis that the implementation of IFRS 9 causes increased volatility of loan loss provisions is confirmed in the case of five banks and within the whole sample of banks at a 5% probability level.

Keywords: Expected credit loss; Loan loss provisions; IFRS 9 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:spr:prbchp:978-3-030-99873-8_19

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DOI: 10.1007/978-3-030-99873-8_19

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