I would like to inform you that the European Banking Authority (EBA) has published a Roadmap for IFRS 9 deliverables which outlines a series of additional activities that the EBA intends to undertake on the post-implementation review of IFRS 9. The EBA is interested in understanding how different methodologies, models, inputs, data gaps and scenarios could lead to material inconsistencies across Banks in their IFRS 9 ECL outcomes. There is a particular interest in the application of macroeconomic scenarios and variables, as well as adjustments made to internal ratings-based (IRB) models which, in a lot cases, are used as a starting point to this particular regulatory methodology.
The roadmap includes a series of qualitative and quantitative monitoring benchmarking exercises, with tentative completion timelines out towards 2021. The quantitative exercises will look to integrate the IFRS 9 parameters into the existing implementing technical standards (ITS) exercise for banks using internal models. All IRB banks are automatically subject to the ITS in a mandatory manner and therefore will fall into scope of the quantitative analysis once the IFRS 9 modelling is included in the ITS. While the integration with the ITS will be a lengthy activity, the EBA will undertake a series of temporary ad-hoc quantitative data collection in the interim period. The sample of banks used for this exercise will be consistent with the previous EBA report on IFRS 9 implementation. The qualitative component of the exercise will require information on modelling practices and this information will be used to complement and inform the quantitative data collected. The quantitative exercise will include a detailed questionnaire covering both IRB banks and smaller Standardised banks (SA). The focus for SA banks will be to determine how they are coping with IFRS 9 requirements.
The information required for the benchmarking activities will include details regarding your IFRS 9 methodology, modelling approaches and implementation assumptions.
Click below to view the roadmap. If you have any questions, I would be happy to discuss in further detail and how best to support you in effectively participating in the upcoming EBA benchmarking activities.