IDEAS home Printed from https://ideas.repec.org/a/prg/jnlpep/v2021y2021i4id775p449-469.html
   My bibliography  Save this article

Impact of Implementation of IFRS 9 on Czech Banking Sector

Author

Listed:
  • Oľga Pastiranová
  • Jiří Witzany

Abstract

The aim of this study is to provide an overview of the principles of IFRS 9 implementation and to analyse its impact on the Czech banking sector. Unlike the previous IAS 39 standard, valid until the end of 2017, the new accounting rules require banks to estimate forward-looking expected credit losses (ECL) while considering relevant exposure level information as well as available macroeconomic predictions. Due to the increased complexity of the ECL models and changing macroeconomic expectations, we hypothesize that the new standard leads to increased volatility of loan loss allowances. This hypothesis is empirically tested and more or less confirmed by an analysis of the quarterly flows of allowances for a sample of large Czech banks from the years 2016-2017 under IAS 39 and from 2018-2019 under IFRS 9.

Suggested Citation

  • Oľga Pastiranová & Jiří Witzany, 2021. "Impact of Implementation of IFRS 9 on Czech Banking Sector," Prague Economic Papers, Prague University of Economics and Business, vol. 2021(4), pages 449-469.
    • Handle: RePEc:prg:jnlpep:v:2021:y:2021:i:4:id:775:p:449-469
    DOI: 10.18267/j.pep.775
    as

    Download full text from publisher

    File URL: http://pep.vse.cz/doi/10.18267/j.pep.775.html
    Download Restriction: free of charge
    File URL: http://pep.vse.cz/doi/10.18267/j.pep.775.pdf
    Download Restriction: free of charge
    File URL: https://libkey.io/10.18267/j.pep.775?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Laeven, Luc & Majnoni, Giovanni, 2003. "Loan loss provisioning and economic slowdowns: too much, too late?," Journal of Financial Intermediation, Elsevier, vol. 12(2), pages 178-197, April.
    2. Jiří Witzany, 2017. "Credit Risk Management," Springer Books, Springer, number 978-3-319-49800-3, January.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Stephen Zamore & Kwame Ohene Djan & Ilan Alon & Bersant Hobdari, 2018. "Credit Risk Research: Review and Agenda," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 54(4), pages 811-835, March.
    2. Oľga Pastiranová & Jiří Witzany, . "Impact of Implementation of IFRS 9 on Czech Banking Sector," Prague Economic Papers, Prague University of Economics and Business, vol. 0.
    3. repec:idn:journl:v:21:y:2019:i:3e:p:1-28 is not listed on IDEAS
    4. Constanza Martínez Ventura, 2005. "Una revisión empírica sobre los determinantes del margen de intermediación en Colombia, 1989-2003," Revista ESPE - Ensayos sobre Política Económica, Banco de la Republica de Colombia, vol. 23(48), pages 118-183, Junio.
    5. Suarez, Javier & Sánchez Serrano, Antonio, 2018. "Approaching non-performing loans from a macroprudential angle," Report of the Advisory Scientific Committee 7, European Systemic Risk Board.
    6. Albertazzi, Ugo & Gambacorta, Leonardo, 2009. "Bank profitability and the business cycle," Journal of Financial Stability, Elsevier, vol. 5(4), pages 393-409, December.
    7. Bouvatier, Vincent & Lepetit, Laetitia, 2008. "Banks' procyclical behavior: Does provisioning matter?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 18(5), pages 513-526, December.
    8. Harry Huizinga & Luc Laeven, 2019. "The Procyclicality of Banking: Evidence from the Euro Area," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 67(3), pages 496-527, September.
    9. Gaffney, Edward & McCann, Fergal, 2019. "The cyclicality in SICR: mortgage modelling under IFRS 9," ESRB Working Paper Series 92, European Systemic Risk Board.
    10. Ildiko Orban & Oday Tamimi, 2020. "Accounting Model for Impairment under IFRS 9 and its Impact on Loss Allowance," European Research Studies Journal, European Research Studies Journal, vol. 0(4), pages 1259-1277.
    11. Morais, Bernardo & Ormazabal, Gaizka & Peydro, J.L. & Roa, Monica & Sarmiento Paipilla, Miguel, 2020. "Forward Looking Loan Provisions : Credit Supply and Risk-Taking," Other publications TiSEM fe99a48f-f94a-41d8-bf3f-3, Tilburg University, School of Economics and Management.
    12. Knaup, M. & Wagner, W.B., 2009. "A Market Based Measure of Credit Quality and Banks' Performance During the Subprime Crisis," Other publications TiSEM a6e8a0c8-00de-45b7-bb02-2, Tilburg University, School of Economics and Management.
    13. Juan Amador & José Gómez-González & Andrés Pabón, 2013. "Loan growth and bank risk: new evidence," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 27(4), pages 365-379, December.
    14. Lubberink, Martien, 2014. "A Primer on Regulatory Bank Capital Adjustments," MPRA Paper 55290, University Library of Munich, Germany.
    15. Mario Quagliariello, 2007. "Banks' riskiness over the business cycle: a panel analysis on Italian intermediaries," Applied Financial Economics, Taylor & Francis Journals, vol. 17(2), pages 119-138.
    16. Emrah Arbak, 2017. "Identifying the provisioning policies of Belgian banks," Working Paper Research 326, National Bank of Belgium.
    17. Wang, Zheqi & Crook, Jonathan & Andreeva, Galina, 2020. "Reducing estimation risk using a Bayesian posterior distribution approach: Application to stress testing mortgage loan default," European Journal of Operational Research, Elsevier, vol. 287(2), pages 725-738.
    18. Manuela M. Dantas & Kenneth J. Merkley & Felipe B. G. Silva, 2023. "Government Guarantees and Banks' Income Smoothing," Papers 2303.03661, arXiv.org.
    19. Crowe, Christopher & Dell’Ariccia, Giovanni & Igan, Deniz & Rabanal, Pau, 2013. "How to deal with real estate booms: Lessons from country experiences," Journal of Financial Stability, Elsevier, vol. 9(3), pages 300-319.
    20. Ignacio Moreno & Purificación Parrado‐Martínez & Antonio Trujillo‐Ponce, 2020. "Economic crisis and determinants of solvency in the insurance sector: new evidence from Spain," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 60(3), pages 2965-2994, September.
    21. Ozili, Peterson K, 2017. "Bank Loan Loss Provisions Research: A Review," MPRA Paper 76495, University Library of Munich, Germany.

    More about this item

    Keywords

    IFRS 9; banks; expected credit loss; loan loss allowances;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:prg:jnlpep:v:2021:y:2021:i:4:id:775:p:449-469. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Stanislav Vojir (email available below). General contact details of provider: https://edirc.repec.org/data/uevsecz.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.