European Banking Authority Publishes Final Guidelines for Implementation of an Expected Credit Loss Accounting Model by Banks

The European Banking Authority has published final Guidelines on banks' credit risk management practices and accounting for expected credit losses. These final Guidelines are a result of a consultation that ended on October 26, 2016, and build on the related Guidance by the Basel Committee on Banking Supervision, published in December 2015. The Guidelines will apply at the start of the first accounting period beginning on or after January 1, 2018.

Many banks in the EU apply the International Financial Reporting Standards. IFRS 9, which will apply for accounting periods beginning January 1, 2018, will require the measurement of impairment loss allowances to be based on an expected credit loss accounting model rather than on an incurred loss accounting model. The use of an ECL accounting model involves some discretion in its application. The Guidelines set out supervisory expectations for credit institutions related to sound credit risk practices associated with implementing and applying an ECL accounting model.

These Guidelines should be read in conjunction with the provisions of the Capital Requirements Regulation and the Capital Requirements Directive IV as well as the relevant technical standards.

View the final Guidelines.

View the Consultation Paper.

View the Basel Committee Guidance.