As 1 January 2018 quickly approaches banks are working extremely hard to get ready for a whole new world of loan provisioning in an IFRS 9 world.
The volume of enhancements to a financial institution’s organisational engagement, data, systems, quantitative models and governance, had been generally underestimated and banks have been busy catching up on the project plans. It is now clear that the management judgment, complexity and volatility in reporting, will require more intensive oversight with increased stakeholder scrutiny.
With less than 5 months to go, banks are entering the final build and parallel run phases of their implementation projects. While good progress has been made, a number of challenges remain, such as data, controls and systems. This has impacted the implementation and testing of key processes and therefore parallel runs have started later than originally planned. It is clear that the impact on operational processes and financial reporting will not be limited to the transition period and the 1 January 2018 adoption date. Impacts and adaptions will need to be made during 2018 and potentially even 2019.
In 2017, EY performed a third IFRS 9 impairment survey of 29 major banking institutions to participate. The survey was undertaken to assess financial institutions’ state of readiness in the implementation of the IFRS 9 programme with a particular focus on impairment. This paper outlines the survey results, including the expected impact of IFRS 9, key operating model and policy decisions, and the assessment of business impacts.