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The Impact of Expectations on IFRS 9 Loan Loss Provisions

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Listed:
  • Petr Polak
  • Jiri Panos

Abstract

This paper describes the implementation of the IFRS 9 accounting standard into a macroprudential (top-down) stress-testing framework. It sets out to present a possible way of overcoming data issues and discusses key assumptions which have an effect on the end results and which stress testers should be aware of. According to the results, macroeconomic expectations play a crucial role in the pass-through of impairment. The paper also presents evidence about the pro-cyclicality of the IFRS 9 approach.

Suggested Citation

  • Petr Polak & Jiri Panos, 2019. "The Impact of Expectations on IFRS 9 Loan Loss Provisions," Research and Policy Notes 2019/03, Czech National Bank.
    • Handle: RePEc:cnb:rpnrpn:2019/03
    as

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    File URL: https://www.cnb.cz/export/sites/cnb/en/economic-research/.galleries/research_publications/irpn/download/rpn_3_2019.pdf
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    References listed on IDEAS

    as
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    2. 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.
    3. Merton, Robert C, 1974. "On the Pricing of Corporate Debt: The Risk Structure of Interest Rates," Journal of Finance, American Finance Association, vol. 29(2), pages 449-470, May.
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      • Eva Hromadkova & Oldrich Koza & Petr Polak & Nikol Polakova, 2018. "The Bank Lending Survey," Working Papers IES 2018/28, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Oct 2018.
    5. Gaffney, Edward & McCann, Fergal, 2019. "The cyclicality in SICR: mortgage modelling under IFRS 9," ESRB Working Paper Series 92, European Systemic Risk Board.
    6. Tijmen Daniëls & Patty Duijm & Franka Liedorp & Dimitris Mokas, 2017. "A top-down stress testing framework for the Dutch banking sector," DNB Occasional Studies 1503, Netherlands Central Bank, Research Department.
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    More about this item

    Keywords

    IFRS 9; impairments; loan loss provisions; macroprudential policy; stress testing;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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