The Ledger

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The Ledger

Posted by Ross Chapman

Event Wrap Up – IFRS 9 in banking - more demanding information requirements hit banks

A recent IFRS 9 focused event, banks such as BBVA, citi, Barclays and Societe Generale came together to review how to implement international financial reporting standards and address IFRS 9 requirements. Chief Accounting Officers, Accounting Policy teams, and CFOs discussed how banks can gear up their implementation of IFRS 9.

With the IFRS 9 standard newly ratified, most banks are now reviewing the requirements and agreeing their interpretations of the policy.

IFRS 9 Requirements

Banks at the ENG event, as noted in the presentation from BBVA, recognise a number of IFRS 9 implementation challenges. The main challenge for the time being is around the 'classification & measurement’ and ‘impairment’ rules. This is expected to have a significant impact on banking key performance indicators, affect the volatility of financial results, and affect equity and regulatory capital.

In principle, IFRS 9 will reflect banking business models - the equation between risk, cash returns and true profit. The accounting for loans must involve a balancing entry of asset (or impairment) to cover any instruments used to underpin lending . With IFRS 9, there is a strong forward looking requirement to understand the cash flow characteristics of loans, such as potential or likely credit losses and to standardise the timely recognition of any loan losses.

IFRS 9 Software Solutions

All of the banks that Aptitude Software have surveyed recognise that IFRS 9 will require new systems and processes. Most new systems don't give accountants the ability to allocate assets to new categories, implement the hedge accounting and deliver the required reporting. Banks will be required to save historical and current information, which for most firms will require handling a huge amount of data. The new systems will need to track increases and decreases in credit risk, measure expected loan losses and comply with the range of new disclosures.

Tom Crawford from Aptitude Software presented on our approach at the event. We have worked with many major financial services organisations to help them address new IFRS and GAAP reporting requirements. We believe that IFRS 9 will require banks to have more flexible finance & accounting systems that deliver true traceability and auditability of results.

Large banks will continue to be affected  by regulatory pressure and new reporting requirements. Excess of regulation, and competing guidance from different regulators means that banks will continue to need best-in-class information systems for accounting and reporting.

We believe that those banks with modern financial architectures will find IFRS 9 just another use case and benefit from their investment in a solid data-driven finance foundation.

For more information on Aptitude Software's approach to IFRS 9 and how we’ve helped leading banks to address financial, statutory and regulatory reporting requirements, please contact info@aptitudesoftware.com.

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