The International Accounting Standard Board (IASB) published the final version of the International Financial Reporting Standard (IFRS 9) Financial Instruments in July 2014. As part of the requirements, Bank will need to develop capabilities to implement the new requirements for impairment assessment. These capabilities will need to be in place from January 1, 2018 i.e. the effective date of implementation of IFRS 9.
The impairment requirements within IFRS 9 indicate that the Bank needs to calculate its impairments based on the concept of Expected Credit Losses (ECL). The ECL will require new and specific calculations around the Probability of Default (PD), Loss Given Default (LGD) and Exposure at Default (EAD) concepts that are in place as per the regulatory framework. In addition to the above, Bank also needs to consider forward looking view as far as lifetime ECL calculation and determination of significant deterioration in credit quality are concerned, as part of IFRS 9 requirements.
- Classification & Measurement of financial instruments
- Impairment of financial assets.
- PD, LGD, EAD modelling
- Expected Credit Loss of financial instrument