Opinion of the European Banking Authority on transitional arrangements and credit risk adjustments due to the introduction of IFRS 9

On 22 November 2016, International Financial Reporting Standard 9, Financial Instruments (IFRS 9), was adopted in the EU1 to replace the previous accounting standard International Accounting Standard 39, Financial Instruments: Recognition and Measurement (IAS 39). The EBA welcomed this change, which marks a move from an incurred loss model under IAS 39 to an expected credit losses (ECL) model under IFRS 9, as well as the timely adoption of IFRS 9 in the EU.2
On 30 September 2016, the European Parliament issued a resolution for the adoption for IFRS 9,3 calling for an examination of the possibility of introducing a phase-in regime for the impairment requirements of IFRS 9 of either three years or such duration until an adequate international solution is put in place, to avoid any sudden unwarranted impact on institutions’ capital ratios and lending. On 23 November 2016, the European Commission, as part of its CRR II/CRD V proposals, made certain suggestions on transitional arrangements to mitigate the effect of the introduction of IFRS 9 on CET1 capital (CET1) resulting from the impairment requirements of IFRS 9.4

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