Provisioning using the expected credit loss (ECL) approach and reducing procyclicality: implementation of IFRS 9 and US GAAP ASC 326 in the Covid-19 crisis

Provisionnement par l’approche des pertes de crédit attendues et réduction de la procyclicité: les normes IFRS 9 et US GAAP ASC 326 à l’épreuve de la crise de la Covid-19

Phu Dao-Le Flécher () and Eric Paget-Blanc ()
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Phu Dao-Le Flécher: UEVE - Université d'Évry-Val-d'Essonne, LITEM - Laboratoire en Innovation, Technologies, Economie et Management (EA 7363) - UEVE - Université d'Évry-Val-d'Essonne - Université Paris-Saclay - IMT-BS - Institut Mines-Télécom Business School - IMT - Institut Mines-Télécom [Paris]
Eric Paget-Blanc: UEVE - Université d'Évry-Val-d'Essonne, LITEM - Laboratoire en Innovation, Technologies, Economie et Management (EA 7363) - UEVE - Université d'Évry-Val-d'Essonne - Université Paris-Saclay - IMT-BS - Institut Mines-Télécom Business School - IMT - Institut Mines-Télécom [Paris]

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Abstract: The article examines whether the new provisioning rules help to reduce the procyclicality of provisions, based on the Covid-19 crisis. The increased flexibility granted by accounting standards for credit loss provisions has been exacerbated by the measures taken by regulators to mitigate the impact of the crisis. From a sample of 94 listed European and American banks, we find that in 2020, impaired loans decreased and provisions for credit losses only slightly increased for European banks, despite the significant decrease of GDP. We conclude that IFRS 9, based on the expected credit losses and associated with regulatory easing measures in times of crisis, contributes to the reduction of the procyclicality of provisions.

Keywords: IFRS 9; Provisions; Expected Credit Losses (ECL); Covid-19; Regulatory measures; Pertes de crédit attendues; Mesures réglementaires (search for similar items in EconPapers)
Date: 2024-01
New Economics Papers: this item is included in nep-acc, nep-ban and nep-eur
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Published in ACCRA Audit Comptabilité Contrôle : Recherches Appliquées, 2024, 19, pp.67-93. ⟨10.3917/accra.019.0067⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04302172

DOI: 10.3917/accra.019.0067

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