The European Banking Authority (EBA) has published its final guidelines on disclosure requirements of International Financial Reporting Standard 9 (IFRS 9) or analogous expected credit losses (ECLs) transitional arrangements.
The guidelines apply to institutions referred to in paragraph 1 of Article 473a of the Capital Requirements Regulation (CRR) that are subject to all or part of the disclosure requirements specified in Part Eight of the CRR in accordance with Articles 6, 10 and 13 of the CRR.
Article 473a of the CRR was inserted by Regulation (EU) No. 2017/2395 of the European Parliament and of the Council amending Regulation (EU) No. 575/2013 as regards transitional arrangements for mitigating the impact of the introduction of IFRS 9 on own funds and for the large exposures treatment of certain public sector exposures denominated in the domestic currency of any Member State (the new Regulation). Article 473a includes provisions on transitional arrangements for the introduction of IFRS 9 and IFRS 9-like expected credit loss models (analogous ECLs), in order to mitigate the impact of the impairment requirements resulting from IFRS 9 on capital and leverage ratios. Article 473a also requires institutions that apply transitional arrangements for IFRS 9 and analogous ECLs to disclose the effect of these transitional arrangements on own funds, risk-based-capital ratio and leverage ratio. In particular, these institutions are required to disclose the amount of own funds, the amount of Common Equity Tier 1 capital, the amount of Tier 1 capital, the Common Equity Tier 1 capital ratio, the Tier 1 capital ratio, the total capital ratio and the leverage ratio with and without the application of the transitional arrangements.
The guidelines specify a uniform disclosure template institutions shall use when disclosing the information on own funds, capital and leverage ratios, with and without the application of transitional arrangements for IFRS 9 or ECLs. The purpose of the guidelines is therefore to ensure consistency and comparability of the data disclosed by institutions during the transition to the full implementation of the new accounting standard and to foster market discipline.
Institutions that choose to apply Article 473a of the CRR should complete the quantitative template contained in Annex I of the guidelines, in accordance with its instructions. Those institutions mentioned in paragraph 1 of Article 473a that chose not to apply Article 473a should disclose the narrative commentary indicated in Annex I, in accordance with the instructions therein.
The guidelines will be published on the EBA’s website and translated into the official EU languages. The deadline for Member State competent authorities to report whether they comply with the guidelines will be 2 months after the publication of the guidelines.
The guidelines apply from 20 March 2018 until the end of the transitional period referred to in paragraph 6 of Article 473a of the CRR.