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Weekly Catch-Up

Tuesday 8 January 2019

European Banking Authority publishes preliminary post-implementation IFRS 9 assessment

The EBA has published a report on IFRS 9 implementation in particular around the first stages of IFRS 9 implementation, whilst a deeper analysis is in progress.

Based on the data collected for the sample of banks, the actual negative day-one impact on CET1 (51 bps on simple average compared to 42 bps in the second impact assessment report from July 2017) and increase in provisions (9% on simple average compared to 13% in the second assessment report from July 2017) broadly confirm the previous estimations from the banks. In relation to the use of transitional arrangements mitigating the impact of IFRS9 on CET1 capital, the average CET1 impact resulting from the add-back of provisions for all the banks in the sample applying these transitional arrangements corresponds to 118 bps.

The EBA has noted that the post-implementation review is only just beginning and its impact and implementation will need to be reviewed over time. The EBA will use a set of indicators using the supervisory reporting data that it will monitor on an on-going basis.

Indian Parliamentary committee suggests suspending new international accounting standards for Indian banks

According to the Parliamentary Standing Committee on Finance, the higher than global capital norms for Indian banks are unrealistic and additional capital case required under the IFRS norms for Indian banks may end up drastically reducing banks’ lending capacity.

“…the additional capital base further stipulated under the latest IFRS norms (beyond Basel III) for Indian banks may end up drastically reducing lending capacity of our banks and put greater pressure on their balance sheet which may accentuate matters and put more fetters on their already restricted lending and inherent lending capacity,”

The Reserve Bank of India had deferred implementation of IFRS by a year from April 2018.

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Leasing companies reporting that clients prepared for IFRS 16 which came into effect on 1st January 2019

IFRS 16 replaces the old International Accounting Standard 17, and means leased assets will be brought onto the balance sheet of each company. The aim of this standard is to give a more complete picture of a company’s financial position.

Not all companies need to adhere to these standards, only those who report under IASB which would include those listed on the stock exchange. Eventually organisations that report under GAAP may be affected too but that will more likely happen in the long term.

It is not anticipated that the lease accounting changes will have a negative impact on the use of contract hire, rather is will allow a clearer view of the financial commitments of a company.

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