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15 December 2021

ESMA publishes Report on Expected Credit Loss disclosures of banks


ESMA has identified room for improvement in the level of compliance, comparability and transparency in the application of the relevant IFRS requirements.

The European Securities and Markets Authority (ESMA), the EU’s securities markets regulator, has today published its Report on the application of the IFRS 7 Financial Instruments: Disclosures (IFRS 7) and IFRS 9 Financial Instruments (impairment requirements) (IFRS 9) requirements regarding banks’ expected credit losses (ECL).

The Report provides recommendations to issuers on how to improve the application of the relevant requirements. Issuers, their auditors and audit committees are expected to consider the findings of the Report when preparing and auditing the financial statements. ESMA’s recommendations to issuers relate to the following areas:

  • general aspects of the ECL-disclosures;
  • assessment of significant increase in credit risk;
  • forward-looking information;
  • explanation of changes in loss allowances;
  • transparency of disclosures on credit risk exposures; and
  • ECL sensitivity disclosures.

ESMA’s Report gives an overview of the level of banks’ compliance with the existing ECL-related requirements of IFRS 7 and IFRS 9, with the primary focus on relevance and comparability of disclosures. The overview builds on a desktop review of the 2020 financial statements of a sample of 44 European banks from 21 jurisdictions.

Next steps

ESMA intends to leverage on the results of this study in its response to the International Accounting Standards Board’s request for information related to the Post-implementation Review of impairment requirements of IFRS 9, which is expected in 2022.

ESMA



© ESMA


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