Impact of the Implementation of IFRS 9 on the Czech Banking Sector
Prague Economic Papers, 2021, DOI: 10.18267/j.pep.775
21 Pages Posted: 4 Jun 2021
Date Written: April 29, 2021
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 the forward-looking expected credit losses (ECL) while considering the 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 the increased volatility of loan loss provisions. This hypothesis is empirically tested and, more or less, confirmed by an analysis of the quarterly provisioning flows for a sample of large Czech banks from the years 2016-17 under IAS 39 and from 2018-19 under IFRS 9.
Keywords: IFRS 9; banks; expected credit loss; loan loss provisions
JEL Classification: G21, G12, G32
Suggested Citation: Suggested Citation