At your risk, Middle East banks. IFRS9 challenges!
Deloitte has just released its Fourth Annual Global International Financial Reporting Standards IFRS Banking Survey that highlights the challenges and consequences of increased provisioning for regulatory capital by banks approaching the implementation of IFRS 9 Financial Instruments. The Deloitte survey was conducted over a critical period in the development of IFRS 9 and provides insights into current thinking across the sector.
This year’s Deloitte survey sample covers 54 banks from Europe, Middle East, Africa, Asia Pacific and the Americas. Key findings from the report include:
- Banks will require 3 years to implement IFRS 9, so will come under pressure with a 2018 effective date
- 56% of banks surveyed feel that pricing will be affected by accounting change
- 70% of banks surveyed expect their IFRS 9 expected loss to be higher than current regulatory expected loss
“Timing of enforcement of IFRS 9 as originally set to take effect on January 1, 2018 with possibility of early implementation, is the biggest challenge given the final standard has just been released,” said Joe El Fadl, Financial Services Industry leader at Deloitte Middle East. “Other implementation challenges are coordinating finance, credit, IT and other teams and resource constraints affecting the financial reporting team as well as the availability and readiness of support from risk and the application of the expected loss model for measurement of impairment.”
The Deloitte annual banking survey reported additional challenges in implementing of IFRS 9. The banks surveyed cited uncertainty around regulatory, tax and U.S. reporting requirements, making it difficult to determine the scope of the project. Internally, systems development and reconciliation was also seen as particular challenges.
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