On July 26, 2016, the EBA published draft Guidelines on bank’s credit risk management practices and accounting for expected losses. IFRS 9 Financial Instruments will replace IAS 39 Financial Instruments: Recognition and Measurement for the accounting periods beginning on or after January 1, 2018. IFRS 9 requires the measurement of impairment loss allowances to be based on an expected credit loss accounting model rather than on an incurred loss accounting model. Many EU banks use the IFRS standards and because the use of an ECL accounting model involves some discretion in it application, the EBA is proposing that bank’s use the Guidelines when implementing and applying IFRS 9. The proposed Guidelines should be read in conjunction with the relevant provisions of the CRR and CRD. The consultation closes on October 26, 2016. The EBA intends to finalize the Guidelines in Q4 2016 or Q1 2017. The finalized Guidelines will need to be implemented by January 1, 2018.
The consultation paper is available at: http://www.eba.europa.eu/documents/10180/1532063/EBA-CP-2016-10+%28CP+on+Guidelines+on+Accounting+for+Expected+Credit%29.pdf.