IFRS9

September 22nd, 2014 by Stephen Jones Leave a reply »

What are the challenges and consequences of increased provisioning for regulatory capital by banks approaching the implementation of IFRS 9 Financial Instruments?.

The Deloitte survey was conducted over a critical period in the development of IFRS 9 and provides insights into current thinking across the sector.

• Banks will require 3 years to implement IFRS 9, so will come under pressure with a 2018 effective date
• Most banks believe that pricing will be affected by accounting changes
•Most banks expect their IFRS 9 loss to be higher than current regulatory expected loss

Implementation challenges include: are coordination of finance, credit, IT and other teams and resource constraints affecting the financial reporting team. There is also need to build the model for risk and the application of the expected loss and measurement of impairment.

Banks also face uncertainty around regulatory, reporting requirements, making it difficult to determine the scope of the project. Systems development and reconciliation is a major challenge. A proven reporting framework for data logging transformation, workflow, approval, aggregation and population of reports formats, with archiving and audit trails, is becoming increasingly important to be able to more easily incorporate such new requirements.

Bankers in the Middle East are being urged to update legacy systems and to invest in electronic platforms to avoid losing customers to more digitally advanced competitors.

Senior banking and finance executives will gather at the 4th Annual Middle East Banking Innovation Summit on 29 & 30 September in Dubai to discuss what the bank of the future will look like, and the technology investments required to keep up with the latest trends.

The retail banking world is going through major revolutions in their operations. Banks are now online retailers, core banking will move to the cloud, there is increasing regulation, increased cyber security risks, Islamic banking is extending. The result is lower margins and increasingly fickle customers, especially in the Middle East with a high expatriate workforce which does not have long term family relationships with a local bank, and is increasingly mobile and tech savvy.

The underpinning theme of the convention is that Banks that are constrained by the technical limitations of legacy systems, are not equipped to compete with new competitors or keep up with technological advancements face significant challenges to survive. In summary: customer expectations, increased regulations and technological innovation require new systems. It’s much easier to implement a new reporting solution than to do a wholesale change of core banking systems. It’s also then relatively easy to interface to new core banking systems as those are introduced.

The FSB published on 21 September 2014 a letter from the Chairman to G20 Finance Ministers and Central Bank Governors. The letter reports on progress in global financial reform, which remains on-track to complete the priorities agreed by the G20 for 2014, and looks ahead to the regulation and supervision of the global system.

The FSB published on 19 September a feasibility study on the global aggregation of OTC derivatives trade repository data (following a consultative report on the subject published on 4 February

The FSB Plenary met on 17-18 September 2014 in Cairns, Australia. At the meeting, the FSB discussed vulnerabilities affecting the global financial system and reviewed work plans for completing core financial reforms.

The FSB published on 18 September a report on jurisdictions’ ability to defer to each other’s OTC derivatives market regulatory regimes

The common trend among all these new regulations is the drive for increased transparency, data integrity and a new level of granularity required to meet all filing requirements for hedge funds, private equity firms and other funds. Chief information officers, chief information security officers, and IT compliance managers face complex and costly compliance issues, and need a better way to ensure that the data on all the necessary forms contains the same, accurate numbers.

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