Download or read book Financial Stability Implications of IFRS 9 written by and published by . This book was released on 2017 with total page 81 pages. Available in PDF, EPUB and Kindle. Book excerpt: IFRS 9 is the new accounting standard for the classification and measurement of financial instruments, issued in response to the mandate received from the G20 in the light of the performance of accounting standards during the global financial crisis. The European Union endorsed IFRS 9 in November 2016 for mandatory application from 1 January 2018 onwards. This ESRB report has been prepared following a request by the European Parliament to consider the financial stability implications of IFRS 9. It analyses two main aspects of IFRS 9 from a macroprudential angle and with a focus on banks: the new approach to the classification and measurement of financial assets and the new expected credit loss (ECL) approach for measuring impairment allowances. IFRS 9 replaces the rules-based classification system under IAS 39 with a clearer principles-based approach. Measurement at fair value generally applies, except for instruments qualifying for amortised cost measurement according to two criteria. First, instruments must have cash flow rights consisting solely of payments of principal and interest (SPPI). Second, they must belong to a hold-to-collect business model. The report reflects a long debate on the use of fair value or historical cost for the measurement of financial assets and the suitability of these methods for different bank assets. It concludes that the classification of financial assets under IFRS 9 will, in principle, be clearer and sounder than under its predecessor and should not generally lead to a significant increase in the use of fair value by EU banks, at least at the aggregate level. The report identifies three areas in which there are significant changes relative to IAS 39 and which, for specific banks or periods of time, could entail relevant differences. First, debt instruments including embedded derivatives will no longer qualify to have their pure debt component separated and thus measured at amortised cost. Second, except for dividend income, none of the gains or losses from equity instruments measured at fair value through other comprehensive income will be reported in profit or loss. Third, highly liquid assets eligible for inclusion in the regulatory liquidity buffer but which, on the basis of their management during normal times, belong to a hold-to-collect business model may be measured at amortised cost, raising concerns about the emergence of unrealised fair value gains or losses if they need to be sold in times of acute stress. According to the assessment in the report, the aggregate quantitative importance of the assets affected by the first two changes is very small, while the importance of the third will depend on business model choices that are hard to anticipate on an ex ante basis.
Download or read book Financial Stability Implications of IFRS 17 written by and published by . This book was released on 2021 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: International Financial Reporting Standard (IFRS) 17 Insurance Contracts ("IFRS 17") is the accounting standard for insurance contracts prepared by the International Accounting Standards Board (IASB) and replaces IFRS 4 Insurance Contracts ("IFRS 4"). IFRS 17 is aimed at enabling market participants to assess the financial position, performance and risk exposures of insurers and compare them across countries and sectors. Amendments to IFRS 17 were issued in June 2020, including a deferral of its effective date by two years. Consequently, IFRS 17 is required to be applied in financial statements for annual reporting periods starting on or after 1 January 2023. Insurance corporations have the option not to apply IFRS 9 Financial Instruments ("IFRS 9") until IFRS 17 enters into force.
Download or read book Accounting discretion of banks during a financial crisis written by Mr.Luc Laeven and published by International Monetary Fund. This book was released on 2009-09-01 with total page 43 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper shows that banks use accounting discretion to overstate the value of distressed assets. Banks' balance sheets overvalue real estate-related assets compared to the market value of these assets, especially during the U.S. mortgage crisis. Share prices of banks with large exposure to mortgage-backed securities also react favorably to recent changes in accounting rules that relax fair-value accounting, and these banks provision less for bad loans. Furthermore, distressed banks use discretion in the classification of mortgage-backed securities to inflate their books. Our results indicate that banks' balance sheets offer a distorted view of the financial health of the banks.
Download or read book The Interaction of the IFRS 9 Expected Loss Approach with Supervisory Rules and Implications for Financial Stability written by Zoltán Novotny-Farkas and published by . This book was released on 2016 with total page 55 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the interaction of the IFRS 9 expected credit loss (ECL) model with supervisory rules and discusses potential implications for financial stability in the European Union. Compared to the incurred loss approach of IAS 39, the IFRS 9 ECL model incorporates earlier and larger impairment allowances and is more closely aligned with regulatory expected loss. The earlier recognition of credit losses will reduce the build-up of loss-overhangs and the overstatement of regulatory capital. In addition, extended disclosure requirements are likely to contribute to more effective market discipline. Through these channels IFRS 9 might enhance financial stability. However, due to the reliance on point-in-time estimates of the main input parameters (probability of default and loss given default) IFRS 9 ECLs will increase the volatility of regulatory capital for some banks. Furthermore, the ECL model provides significant room for managerial discretion. Bank supervisors might play an important role in the implementation of IFRS 9, but too much supervisory intervention bears the risk of introducing a prudential bias into loan loss accounting that compromises the integrity of financial reporting. Overall, the potential benefits of the standard will crucially depend on its proper and consistent application across jurisdictions.
Download or read book The Significance of IFRS 9 for Financial Stability and Supervisory Rules written by and published by . This book was released on 2015 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the interaction of the IFRS 9 expected credit loss model with supervisory rules and discusses potential implications for financial stability. IFRS 9 is more closely aligned with bank supervision, incorporates earlier and larger impairment allowances, and thus, is likely to mitigate the procyclical tendencies of the IAS 39 incurred loss approach. Combined with improved transparency, IFRS 9 might enhance financial stability. However, the potential benefits of the standard will crucially depend on its proper and consistent application. This document was provided by Policy Department A at the request of the ECON Committee.
Download or read book Expected Credit Loss Modeling from a Top Down Stress Testing Perspective written by Mr.Marco Gross and published by International Monetary Fund. This book was released on 2020-07-03 with total page 47 pages. Available in PDF, EPUB and Kindle. Book excerpt: The objective of this paper is to present an integrated tool suite for IFRS 9- and CECL-compatible estimation in top-down solvency stress tests. The tool suite serves as an illustration for institutions wishing to include accounting-based approaches for credit risk modeling in top-down stress tests.
Download or read book Canada written by International Monetary Fund. Monetary and Capital Markets Department and published by International Monetary Fund. This book was released on 2019-06-24 with total page 85 pages. Available in PDF, EPUB and Kindle. Book excerpt: This Financial System Stability Assessment paper discusses that Canada has enjoyed favorable macroeconomic outcomes over the past decades, and its vibrant financial system continues to grow robustly. However, macrofinancial vulnerabilities—notably, elevated household debt and housing market imbalances—remain substantial, posing financial stability concerns. Various parts of the financial system are directly exposed to the housing market and/or linked through housing finance. The financial system would be able to manage severe macrofinancial shocks. Major deposit-taking institutions would remain resilient, but mortgage insurers would need additional capital in a severe adverse scenario. Housing finance is broadly resilient, notwithstanding some weaknesses in the small non-prime mortgage lending segment. Although banks’ overall capital buffers are adequate, additional required capital for mortgage exposures, along with measures to increase risk-based differentiation in mortgage pricing, would be desirable. This would help ensure adequate through-the cycle buffers, improve mortgage risk-pricing, and limit procyclical effects induced by housing market corrections.
Download or read book Supervisory Roles in Loan Loss Provisioning in Countries Implementing IFRS written by Ellen Gaston and published by International Monetary Fund. This book was released on 2014-09-15 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt: Countries implementing International Financial Reporting Standards (IFRS) for loan loss provisioning by banks have been guided by two different approaches: International Accounting Standards (IAS) 39 and Basel standards. This paper discusses the different accounting and regulatory approaches in loan loss provisioning, and the challenges supervisors face when there are different perspectives and lack of guidance from IFRS. It suggests actions that supervisors can take to help banks meet regulatory and capital requirements and, at the same time, comply with accounting principles.
Download or read book Global Financial Stability Report April 2013 written by International Monetary Fund. Monetary and Capital Markets Department and published by International Monetary Fund. This book was released on 2013-04-17 with total page 160 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Global Financial Stability Report examines current risks facing the global financial system and policy actions that may mitigate these. It analyzes the key challenges facing financial and nonfinancial firms as they continue to repair their balance sheets. Chapter 2 takes a closer look at whether sovereign credit default swaps markets are good indicators of sovereign credit risk. Chapter 3 examines unconventional monetary policy in some depth, including the policies pursued by the Federal Reserve, the Bank of England, the Bank of Japan, the European Central Bank, and the U.S. Federal Reserve.
Download or read book Global Financial Stability Report April 2016 written by International Monetary Fund. Monetary and Capital Markets Department and published by International Monetary Fund. This book was released on 2016-04-11 with total page 135 pages. Available in PDF, EPUB and Kindle. Book excerpt: The current Global Financial Stability Report (April 2016) finds that global financial stability risks have risen since the last report in October 2015. The new report finds that the outlook has deteriorated in advanced economies because of heightened uncertainty and setbacks to growth and confidence, while declines in oil and commodity prices and slower growth have kept risks elevated in emerging markets. These developments have tightened financial conditions, reduced risk appetite, raised credit risks, and stymied balance sheet repair. A broad-based policy response is needed to secure financial stability. Advanced economies must deal with crisis legacy issues, emerging markets need to bolster their resilience to global headwinds, and the resilience of market liquidity should be enhanced. The report also examines financial spillovers from emerging market economies and finds that they have risen substantially. This implies that when assessing macro-financial conditions, policymakers may need to increasingly take into account economic developments in emerging market economies. Finally, the report assesses changes in the systemic importance of insurers, finding that across advanced economies the contribution of life insurers to systemic risk has increased in recent years. The results suggest that supervisors and regulators should take a more macroprudential approach to the sector.
Download or read book Bank Loan Classification and Provisioning Practices in Selected Developed and Emerging Countries written by Alain Laurin and published by World Bank Publications. This book was released on 2003 with total page 64 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book The Credit Risk Transfer Market and Stability Implications for U K Financial Institutions written by Li L. Ong and published by International Monetary Fund. This book was released on 2006-06 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: The increasing ability to trade credit risk in financial markets has facilitated its dispersion across the financial and other sectors. However, specific risks attached to credit risk transfer (CRT) instruments in a market with still-limited liquidity means that its rapid expansion may actually pose problems for financial sector stability in the event of a major negative shock to credit markets. This paper attempts to quantify the exposure of major U.K. financial groups to credit derivatives, by applying a vector autoregression (VAR) model to publicly available market prices. Our results indicate that use of credit derivatives does not pose a substantial threat to financial sector stability in the United Kingdom. Exposures across major financial institutions appear sufficiently diversified to limit the impact of any shock to the market, while major insurance companies are largely exposed to the "safer" senior tranches.
Download or read book Managing Climate Risk in the U S Financial System written by Leonardo Martinez-Diaz and published by U.S. Commodity Futures Trading Commission . This book was released on 2020-09-09 with total page 196 pages. Available in PDF, EPUB and Kindle. Book excerpt: This publication serves as a roadmap for exploring and managing climate risk in the U.S. financial system. It is the first major climate publication by a U.S. financial regulator. The central message is that U.S. financial regulators must recognize that climate change poses serious emerging risks to the U.S. financial system, and they should move urgently and decisively to measure, understand, and address these risks. Achieving this goal calls for strengthening regulators’ capabilities, expertise, and data and tools to better monitor, analyze, and quantify climate risks. It calls for working closely with the private sector to ensure that financial institutions and market participants do the same. And it calls for policy and regulatory choices that are flexible, open-ended, and adaptable to new information about climate change and its risks, based on close and iterative dialogue with the private sector. At the same time, the financial community should not simply be reactive—it should provide solutions. Regulators should recognize that the financial system can itself be a catalyst for investments that accelerate economic resilience and the transition to a net-zero emissions economy. Financial innovations, in the form of new financial products, services, and technologies, can help the U.S. economy better manage climate risk and help channel more capital into technologies essential for the transition. https://doi.org/10.5281/zenodo.5247742
Download or read book International Convergence of Capital Measurement and Capital Standards written by and published by Lulu.com. This book was released on 2004 with total page 294 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Banking in Africa Delivering on Financial Inclusion Supporting Financial Stability written by European Investment Bank and published by European Investment Bank. This book was released on 2018-11-21 with total page 297 pages. Available in PDF, EPUB and Kindle. Book excerpt: In its fourth edition, this report focuses on recent developments in Africa's banking sectors and the policy options for all stakeholders. The study of banking sectors across all African sub-regions includes the results of the EIB survey of banking groups operating in Africa. Three thematic chapters address challenges and opportunities for financing investment in Africa: Crowding out of private sector lending by public debt issuance The state of bank recovery and resolution laws in Africa Policy options on how to finance infrastructure development. The report finds that in many African banking markets, the last two years saw a pause in financial deepening. However, a rising share of banking groups report improving market conditions and plan a structural expansion of their operations in Africa and a continued push for new technologies.
Download or read book Thailand written by International Monetary Fund. Monetary and Capital Markets Department and published by International Monetary Fund. This book was released on 2019-10-07 with total page 136 pages. Available in PDF, EPUB and Kindle. Book excerpt: This Financial System Stability Assessment paper on Thailand highlights that assets of the insurance and mutual fund sectors have doubled as a share of gross domestic product over the last decade, and capital markets are largely on par with regional peers. The report discusses significant slowdown in China and advanced economies, a sharp rise in risk premia, and entrenched low inflation would adversely impact the financial system. Stress tests results suggest that the banking sector is resilient to severe shocks and that systemic and contagion risks stemming from interlinkages are limited. Financial system oversight is generally strong, but the operational independence of supervisory agencies can be strengthened further. The operational independence of supervisory agencies can be strengthened further by reducing the involvement of the Ministry of Finance in prudential issues and ensuring that each agency has full control over decisions that lie within its areas of responsibility.
Download or read book Central Bank Finances written by David Archer and published by . This book was released on 2013 with total page 90 pages. Available in PDF, EPUB and Kindle. Book excerpt:
