15 March 2021

Seeing the unseeable – credit risk in a world without defaults

Businesses and individuals haven’t suffered as much as we might’ve expected financially, but it isn’t because there haven’t been losses. Government spending has filled the gaps. It’s hard not to be optimistic if savings are up, markets are at all-time highs and indicators like GDP and unemployment continue to perform better than expected. Except that’s due to support being greater and longer than any of us thought, and that’s only because economic paralysis has lasted much longer too. This raises multiple issues like:

18 December 2020

EX 6.1 - IBOR reform Illustrative disclosures

These example disclosures illustrate the 'phase 1' and 'phase 2' amendments to IFRS 7. Supporting commentary is also provided. This publication is for illustrative purposes only and should be used in conjunction with the relevant financial reporting standards and any other reporting pronouncements and legislation applicable in specific jurisdictions.

20 November 2020

Disclosure of IFRS 9 ECL model adjustments by banks in the context of COVID-19

Clear disclosure by banks of IFRS 9 ECL model adjustments will be key in the context of COVID-19. This Spotlight sets out the key IFRS disclosure requirements and practical considerations.

09 October 2020

Practical guide to Phase 2 amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 for interest rate benchmark (IBOR) reform

The IASB has issued amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 that address issues arising during the reform of benchmark interest rates including the replacement of one benchmark rate with an alternative one. Given the pervasive nature of IBOR-based contracts, the amendments could affect companies in all industries. The amendments are effective from 1 January 2021. This publication provides guidance on how to apply the Phase 2 amendments to various contracts and hedge accounting relationships, including the interaction with the Phase 1 reliefs for hedge accounting.

12 November 2020

FAQ 3.2.17 – In the context of COVID-19, what are relevant considerations when determining if a financial instrument is credit impaired based on qualitative factors?

As a result of COVID-19, there has been widespread granting of payment holidays, as well as subsequent payment holiday extensions, to borrowers by banks and similar lending institutions. As a result, financial instruments will often hit ‘quantitative’ triggers for credit impairment, based on days past due, much later than would ordinarily be the case.

09 October 2020

FAQ 2.2 – What does ‘economically equivalent’ mean?

Question Several IBOR reliefs are conditional on the new basis for determining cash flows being ‘economically equivalent’ to the previous basis, or on the changes being ‘required by interest rate benchmark reform’ (which itself requires them to be ‘economically equivalent’ as set out in paragraph 5.4.7(b) of IFRS 9).

08 October 2020

FAQ 2.1 – What does ‘necessary as a direct consequence of interest rate benchmark reform’ mean?

Question Several IBOR reliefs are conditional on changes to the basis for determining contractual cash flows being necessary as a ‘direct consequence’ of interest rate benchmark reform, or on the changes being ‘required by interest rate benchmark reform’ (which itself requires them to be a ‘direct consequence’ as set out in paragraph 5.4.7(a) of IFRS 9).

14 August 2020

FAQ 3.2.15 – Factors to consider in relation to ‘days past due’ for IFRS 9 ECL where a loan has been granted a payment holiday

The IFRS 9 ECL model contains rebuttable presumptions where contractual payments on a financial instrument are more than 30 or 90 days past due. Where a loan is granted a payment holiday (for example, in connection with COVID-19), what factors should be considered when assessing ‘days past due’ and determining whether the loan has had a significant increase in credit risk (‘SICR’) or is credit impaired?

10 May 2021 | Updated 17 May 2021

The road(s) ahead: Estimating credit losses in 2021 & beyond

The road(s) ahead: Estimating credit losses in 2021 & beyond

13 May 2020

Banking - Post-model adjustments for expected credit losses during COVID-19

Banks calculate expected credit losses (‘ECLs’) under IFRS 9 using forward-looking judgements, models and data. Overlays, or post-model adjustments, are often used to address shortcomings where models or data have limitations. As a result of severe economic conditions and uncertainty arising due to coronavirus (COVID-19), there is an increased need to apply overlays in calculating ECLs. In this publication, we provide considerations that might be helpful in developing and monitoring such overlays.