In our latest whitepaper, Seven risk predictions for 2018, we explore which trends lenders are most likely to adopt to protect themselves, consumers and the global economies, whilst also going back to the most important aspect of any business: profitability. Here's our sixth risk prediction...
#6: Will 2018 bring IFRS 9 to its conclusion?
2018 is the deadline for IFRS 9 compliance and a milestone for lenders accounting under these new standards.
Most organisations will have their IFRS 9 framework fully embedded into their business practices following model development, validation, implementation, testing and execution. For lenders of all sizes this is the culmination of a momentous amount of work so does this signal the end of IFRS 9?
Lenders may have more work to do to satisfy auditors. The audit at yearend may highlight model weaknesses, particularly those associated with the forward-looking requirements after sensitivity or benchmarking tests. Auditors have shone the spotlight on the end-to-end process which may force lenders to revisit their data processes and system setups to improve controls and efficiency.
For some, IFRS 9 was badly timed with an agenda already packed with key projects and business goals. These lenders are likely to have taken a simplistic approach to safeguard compliance for this year with future plans to revisit. 2018 may be the beginning of the planning period for this 2nd generation of models by synergising with other programmes such as moving to IRB status.
Even if you’ve escaped the hazards outlined above, there will be more to do on IFRS 9 in 2018. The models must be monitored and validated to ensure they remain optimal and accurate and IFRS 9 provisions must be forecast and stressed for planning and ICAAP purposes. Model refinements may be necessary as the approaches adopted to meet the complexity and novelty within the standards are understood better.