On 12 December 2017, the European Parliament amended the Capital Requirements Regulation (CRR) to mitigate the impact of the implementation of IFRS 9 on capital. The amendment shall apply from 1 January 2018.
The amendment has introduced a five-year transitional period. During that time, institutions can include in their capital a specific percentage of provisions created due to the adoption of IFRS 9 and provisions created subsequently after the first application of IFRS 9. The percentage starts at 95% for 2018, decreasing over time to 25% in 2022, and reaching 0% after 2022 when IFRS 9 should be fully implemented.
Institutions should decide whether to apply those transitional arrangements and inform the competent authority accordingly. During the transitional period, institutions should have the possibility to reverse once their initial decision, subject to the prior permission of the competent authority which should ensure that such decision is not motivated by considerations of regulatory arbitrage.
Institutions that decide to apply the IFRS 9 transitional arrangements are required to publicly disclose their capital both with and without the application of these arrangements in order to enable users of this information to determine the impact of such arrangements.
To ensure the consistency of the disclosure, the EBA published guidelines on the IFRS 9 transitional arrangements on 12 January 2018. The guidelines specify uniform disclosure templates institutions shall use when disclosing the information on capital with and without the application of transitional arrangements for IFRS 9.
25-1-2018