12 May 2017

EBA publishes final Guidelines on credit institutions' credit risk management practices and accounting for expected credit losses

A significant number of credit institutions in the EU apply the IFRS standards, which for the accounting periods beginning on or after 1 January 2018 require the measurement of impairment loss provisions to be based on an expected credit loss accounting model (IFRS 9) rather than on an incurred loss accounting model (IAS 39). The EBA welcomes this approach on credit loss provisioning, as it should also contribute in addressing the G20's concerns about the issue of the ‘too little, too late' recognition of credit losses and improve the accounting recognition of credit losses by incorporating a broader range of credit information.

The EBA final Guidelines set out sound credit risk management practices for credit institutions associated with the implementation and on-going application of the accounting for expected credit losses. High-quality and consistent application of the accounting standards is the basis for the effective and consistent application of the regulatory capital standards.

However, these Guidelines do not set out requirements regarding the determination of expected losses for regulatory capital purposes and would not prevent a credit institution from meeting the impairment requirements of IFRS 9.

These Guidelines build on the global guidance on credit risk and accounting for expected credit losses published by the Basel Committee on Banking Supervision (BCBS) in December 2015.

Full press release

Final report

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