Banks reporting under IFRS have spared no efforts to be ready for the introduction of IFRS9 on January 1, 2018. This involved a lot of risk modelling work, heavy IT projects, fundamental changes in governance and a thorough overhaul of accounting practices.
During the first years of business-as-usual, IFRS9 teams struggled with meeting reporting deadlines, living up to reporting requirements and numerous internal and external Audits. High workloads and a need for stability after the ‘go live’ explain why IFRS9 set-ups remained fairly stable. Keeping in mind the saying “If it ain’t broken, don’t fix it!”, the emphasis was on making optimizations to what already works.
Things have fundamentally changed in 2020, when the world suddenly became a much more turbulent place. In response to this, the management of banks as well as regulators started requesting endless ad hoc and recurrent stress tests. Expected credit losses are a dominant driver of P&L in most banks, which explains why 80% of stress testing needs can be covered by the 20% of available tooling provided by IFRS9.
This in turn explains why these stress tests usually end up on the desks of already overburdened IFRS9 specialists. Some of our IFRSx customers by now adapt and run their IFRS9 set-ups on an almost weekly basis, which creates all sorts of new challenges.
Do you agree with the way we see things at Credo, or not?
We’d be glad to hear your opinion and share our own insights and plans to tackle these challenges over the years to come. Here are a few of the topics that we have in mind:
- IRB and IFRS9 modelling: align, or split?
- Coping with high workloads
- Key person risk
- Information overload: keeping track of a tsunami of results
- Stress testing: best (as well as not-so-good) practices
Drop us a line at david.vandenabeele@credo.be and let’s discuss in a short virtual or physical meeting!