EXPECTED CREDIT LOSS MODEL BY IFRS 9 AND ITS POSSIBLE EARLY IMPACTS ON EUROPEAN AND TURKISH BANKING SECTOR
Abstract
ABSTRACT
IFRS
9 – ²Financial
Instruments², the replacement of IAS 39 – ²Financial
Instruments: Recognition and Measurement²
was issued by International Accounting Standards Board in July, 2014 and became
mandatory on January 1, 2018. The significant change implemented in the new
standard is about the “impairment” phase which is based on "Expected
Credit Losses" (ECL) rather than "Incurred Credit Losses". In
this study, the measurement and recognition of allowances for impairment are
explained and then the expected possible qualitative and quantitative effects
of this transition primarily in the European Banking Industry are analyzed and compared
with Turkish Banking Industry. It is
expected that, ECL application by European banks would result in on average 13%-18%
increase in loss provisions and Common Equity
Tier 1 (CET1) and total capital ratio decrease by on average 45-75 basis points
(bps) and 35-50 bps, respectively whereas the total amount of provisions
will be diminishing by 4.1% and will have 33 bps and 21 bps positive impacts on
CET1 and total capital adequacy ratio on average, respectively for Turkish banks.
References
- REFERENCES
- Abad, J. and Suarez, J. 2017. “Assessing the cyclical implications of IFRS 9: A recursive model”, ESRB Occasional Paper, vol.12.
- BRSA 2016. “Regulation on the Procedures and Principles for Determination of Classification of Loans by Banks and Provisions to be Set Aside”.
- Beatty, A and S Liao 2011. “Do delays in expected loss recognition affect banks’ willingness to lend?”, Journal of Accounting and Economics, vol. 52, 1–20.
- Bernanke, B. and Lown, C. 1991. “The credit crunch”, Brooking Papers on Economic Activity, vol. 2, 205-247.
- Bushman, R and C Williams 2012. “Accounting Discretion, Loan Loss Provisioning, and Discipline of Banks’ Risk-Taking”, Journal of Accounting and Economics, vol. 54, 1–18.
- Cohen, B. and Edwards, G. 2017. “The New Era of Expected Credit Loss Provisioning”, BIS Quarterly Review.
- Comert, H. and Colak, S. 2014. “The Impacts of the Global Crisis on the Turkish Economy and Policy Responses”, Middle East Technical University, ERC Working Papers in Economics, 14/17.
- Ernst & Young. 2017. “EY IFRS 9 Impairment Banking Survey”.
- Ernst & Young. 2014. “Impairment of Financial Instruments Under IFRS 9”.
- Erdoğan, A. 2014. “Basel Kriterlerinin Bankacilik Sektörüne Etkisi ve Türkiye’de Bankacilik Sektörünün Basel Kriterlerine Uyum Süreci”, Trakya Üniversitesi Sosyal Bilimler Dergisi, vol. 16 (1) .141-182
- European Banking Authority. 2016. “Report on Results from the EBA Impact Assessment of IFRS 9”.
- European Banking Authority. 2017. “Report on Results from the Second EBA Impact Assessment of IFRS 9”.
- European Financial Reporting Advisory Group. 2015. “Endorsement Advice on IFRS 9 Financial Instruments”.
- European Systemic Risk Board. 2017. “Financial stability implications of IFRS 9”.
- Financial Stability Forum. 2009. “Report of the Financial Stability Forum on Addressing Procyclicality in the Financial System”.
- Fraisse, H., Lé, M. and Thesmar, D. 2015. “The Real Effects of Bank Capital Requirements”, Débats Économiques et Financiers, vol. 8.
- Gornjak, M. 2017. “Comparison of IAS 39 and IFRS 9: The Analysis of Replacement”, International Journal of Management, Knowledge and Learning, vol. 6(1), 115–130
- Gropp, R., Mosk, T., Ongena, S. and Wix, C. 2016. “Bank Response to Higher Capital Requirements:Evidence from a Natural Experiment”, SAFE Working Paper, vol. 156.
- Hoogervorst, H. 2016. Introductory comments to the European Parliament. Retrieved from http://www.ifrs.org/Alerts/Conference/Documents/2015/Hans-Hoogervorst-speech-Jan-2016.pdf
- Huian, M. 2012. “Accounting for Financial Assets and Financial Liabilities According To IFRS 9, Economic Sciences vol. 59 (1), 27-47, doi: 10.2478/v10316-012-0002-0
- IFRS 9: Financial Instruments.
- Jiménez, G., Ongena, S., Peydró, J.-L. and Saurina, J. 2017. “Macroprudential Policy, Countercyclical Bank Capital Buffers and Credit Supply: Evidence from the Spanish Dynamic Provisioning Experiments”, Journal of Political Economy, forthcoming.
- Laeven, L and G Majnoni. 2003. “Loan Loss Provisioning and Economic Slowdowns: Too much, Too Late?”, Journal of Financial Intermediation, vol 12, 178–97.
- Novotny-Farkas, Z. 2016. “The Interaction of the IFRS 9 Expected Loss Approach with Supervisory Rules and Implications for Financial Stability”, Accounting in Europe, 13(2), 197-227.
- Deloitte. 2016. “Sixth Global IFRS Banking Survey: No Time Like the Present”.
- PricewaterhouseCoopers UK. 2016. “IFRS 9: Impairment – Global Banking Industry Benchmark”.
- KPMG. 2014. “First Impressions: IFRS 9 Financial Instruments”.
- Tong, T. 2014. “A Review of the Expected Credit Loss Model of IFRS 9 Financial Instruments”
- www.https://www.bddk.org.tr/websitesi/english/About_Us/About_BRSA/5804brsa_booklet_nov2015.pdf
- www.bddk.org.tr
EXPECTED CREDIT LOSS MODEL BY IFRS 9 AND ITS POSSIBLE EARLY IMPACTS ON EUROPEAN AND TURKISH BANKING SECTOR
Abstract
ÖZ
Uluslararası
Muhasebe Standartları Kurulu, 2014 yılının Temmuz ayında, UMS 39'un “Finansal
Araçlar: Muhasebeleştirme ve Ölçme”nin yerine UFRS 9 - “Finansal Araçlar”
Standardını yayınlamıştır. Yeni standart 1 Ocak 2018'den itibaren yürülüğe
girmiştir. Yeni standarttaki en önemli değişiklik, “değer düşüklüğü” bölümünde
yapılan "Gerçekleşen Kredi Zararları" yerine "Beklenen Kredi
Zararları" uygulamasıdır. Bu çalışmada, yeni standarda göre değer
düşüklüğü karşılıklarının ölçümü ve muhasebeleştirilmesi açıklandıktan sonra,
Avrupa Bankacılık Sektöründe bu geçişin beklenen muhtemel nitel ve nicel
etkileri analiz edilip, sonuçları Türk Bankacılık Sektörü ile
karşılaştırılmıştır. Avrupa’da bu geçiş sonucu, karşılıkların ortalama olarak %
13 -% 18 aralığında artması, buna bağlı olarak da çekirdek sermaye ve toplam
sermaye yeterliliği rasyosunda sırasıyla, ortalama 45-75 ve 35-50 baz puanlık düşüş
beklenmektedir. Türkiye’deki beklenti ise, sonuçların tam tersi yönde olacağıdır.
Türkiye’deki bankalar için toplam karşılıklar tutarının % 4,1 düşmesi ve çekirdek
sermaye ve toplam sermaye yeterliliği rasyolarında ise, sırasıyla, 33 ve 21 baz
puanlık pozitif etki olması beklenmektedir.
Keywords
References
- REFERENCES
- Abad, J. and Suarez, J. 2017. “Assessing the cyclical implications of IFRS 9: A recursive model”, ESRB Occasional Paper, vol.12.
- BRSA 2016. “Regulation on the Procedures and Principles for Determination of Classification of Loans by Banks and Provisions to be Set Aside”.
- Beatty, A and S Liao 2011. “Do delays in expected loss recognition affect banks’ willingness to lend?”, Journal of Accounting and Economics, vol. 52, 1–20.
- Bernanke, B. and Lown, C. 1991. “The credit crunch”, Brooking Papers on Economic Activity, vol. 2, 205-247.
- Bushman, R and C Williams 2012. “Accounting Discretion, Loan Loss Provisioning, and Discipline of Banks’ Risk-Taking”, Journal of Accounting and Economics, vol. 54, 1–18.
- Cohen, B. and Edwards, G. 2017. “The New Era of Expected Credit Loss Provisioning”, BIS Quarterly Review.
- Comert, H. and Colak, S. 2014. “The Impacts of the Global Crisis on the Turkish Economy and Policy Responses”, Middle East Technical University, ERC Working Papers in Economics, 14/17.
- Ernst & Young. 2017. “EY IFRS 9 Impairment Banking Survey”.
- Ernst & Young. 2014. “Impairment of Financial Instruments Under IFRS 9”.
- Erdoğan, A. 2014. “Basel Kriterlerinin Bankacilik Sektörüne Etkisi ve Türkiye’de Bankacilik Sektörünün Basel Kriterlerine Uyum Süreci”, Trakya Üniversitesi Sosyal Bilimler Dergisi, vol. 16 (1) .141-182
- European Banking Authority. 2016. “Report on Results from the EBA Impact Assessment of IFRS 9”.
- European Banking Authority. 2017. “Report on Results from the Second EBA Impact Assessment of IFRS 9”.
- European Financial Reporting Advisory Group. 2015. “Endorsement Advice on IFRS 9 Financial Instruments”.
- European Systemic Risk Board. 2017. “Financial stability implications of IFRS 9”.
- Financial Stability Forum. 2009. “Report of the Financial Stability Forum on Addressing Procyclicality in the Financial System”.
- Fraisse, H., Lé, M. and Thesmar, D. 2015. “The Real Effects of Bank Capital Requirements”, Débats Économiques et Financiers, vol. 8.
- Gornjak, M. 2017. “Comparison of IAS 39 and IFRS 9: The Analysis of Replacement”, International Journal of Management, Knowledge and Learning, vol. 6(1), 115–130
- Gropp, R., Mosk, T., Ongena, S. and Wix, C. 2016. “Bank Response to Higher Capital Requirements:Evidence from a Natural Experiment”, SAFE Working Paper, vol. 156.
- Hoogervorst, H. 2016. Introductory comments to the European Parliament. Retrieved from http://www.ifrs.org/Alerts/Conference/Documents/2015/Hans-Hoogervorst-speech-Jan-2016.pdf
- Huian, M. 2012. “Accounting for Financial Assets and Financial Liabilities According To IFRS 9, Economic Sciences vol. 59 (1), 27-47, doi: 10.2478/v10316-012-0002-0
- IFRS 9: Financial Instruments.
- Jiménez, G., Ongena, S., Peydró, J.-L. and Saurina, J. 2017. “Macroprudential Policy, Countercyclical Bank Capital Buffers and Credit Supply: Evidence from the Spanish Dynamic Provisioning Experiments”, Journal of Political Economy, forthcoming.
- Laeven, L and G Majnoni. 2003. “Loan Loss Provisioning and Economic Slowdowns: Too much, Too Late?”, Journal of Financial Intermediation, vol 12, 178–97.
- Novotny-Farkas, Z. 2016. “The Interaction of the IFRS 9 Expected Loss Approach with Supervisory Rules and Implications for Financial Stability”, Accounting in Europe, 13(2), 197-227.
- Deloitte. 2016. “Sixth Global IFRS Banking Survey: No Time Like the Present”.
- PricewaterhouseCoopers UK. 2016. “IFRS 9: Impairment – Global Banking Industry Benchmark”.
- KPMG. 2014. “First Impressions: IFRS 9 Financial Instruments”.
- Tong, T. 2014. “A Review of the Expected Credit Loss Model of IFRS 9 Financial Instruments”
- www.https://www.bddk.org.tr/websitesi/english/About_Us/About_BRSA/5804brsa_booklet_nov2015.pdf
- www.bddk.org.tr
Details
| Primary Language | English |
|---|---|
| Subjects | Business Administration |
| Journal Section | MAIN SECTION |
| Authors | |
| Publication Date | September 27, 2018 |
| Submission Date | May 10, 2018 |
| Published in Issue | Year 2018 |