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

See all articles by Jiri Witzany

Jiri Witzany

University of Economics in Prague

Olga Pastiranová

University of Economics Prague

Date Written: April 29, 2021

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 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

Witzany, Jiri and Pastiranová, Olga, Impact of the Implementation of IFRS 9 on the Czech Banking Sector (April 29, 2021). Prague Economic Papers, 2021, DOI: 10.18267/j.pep.775, Available at SSRN: https://ssrn.com/abstract=3859402

Jiri Witzany (Contact Author)

University of Economics in Prague ( email )

Winston Churchilla Sq. 4
Prague 3, 130 67
Czech Republic

Olga Pastiranová

University of Economics Prague ( email )

Czech Republic

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