Financial Services Ireland

IFRS 9: latest insights on expected credit losses and the challenges ahead

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IFRS 9: latest insights on expected credit losses and the challenges ahead

In Spring 2020, EY performed a review of first quarter (Q1) financial disclosures made available by 18 banking institutions head-quartered in Europe. The purpose of our analysis was to understand how banks have managed the unique situation of the Covid-19 pandemic in their expected credit losses (ECL) considering a limited financial close timeline. Our focus was:

  • The magnitude of the impact in Q1
  • How the impact has been assessed
  • The underlying ECL drivers
  • How approaches on staging, scenarios, models and overlays could be compared

It is important to note that most Q1 communications are not International Financial Reporting Standard (IFRS) financial statements. Therefore, our analysis also considers other publicly available information,
such as management or earnings reports and analyst presentations. A noted limitation of this approach is the significant diversity in terms of content, format and granularity, meaning comparisons between banks were challenging. Where this has led to assumptions, we have referred to this.

This document also considers how banks may prepare for the second quarter (Q2) 2020. Overall, the wider effect of new money poured on the market by governments, in particular state-guaranteed loans, was not yet visible as of the end of March, the Q1 end for all banks surveyed. We expect to see more of this effect in the half-year accounts.

Download our analysis below. You may also find it useful to review our latest insights and thinking to support you in leading through volatility; don’t hesitate to reach out if you have any questions.

Danny Buckley

Partner, CFO Advisory
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