Shearman & Sterling LLP | FinReg | UK Prudential Regulator Publishes Further Guidance on IFRS 9 and Capital Requirements
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  • UK Prudential Regulator Publishes Further Guidance on IFRS 9 and Capital Requirements
    06/04/2020
    The U.K. Prudential Regulation Authority has published a “Dear CEO” letter providing further guidance on IFRS 9 and capital requirements in the context of COVID-19. The PRA published a “Dear CEO” letter in March 2020, advising firms on the application of certain key concepts (including the definition of "default" in the Capital Requirements Regulation and expected credit loss accounting under IFRS 9). This guidance related in large part to payment holidays, many of which are now coming to an end. The PRA’s latest guidance therefore focuses on exits from those initial payment deferrals. Key elements of the guidance include:
     
    • the mechanism for counting days past due for payment deferrals;
    • the treatment of COVID-19 related payment deferrals which should not, in the PRA’s view, automatically result in treatment as credit-impairment under ECL or default under CRR; and
    • the need for holistic assessments when considering the appropriate treatment of loans past due or benefiting from payment deferrals.

    The PRA believes that its guidance complies with CRR and IFRS 9 but it reminds firms that it is still the responsibility of each firm to satisfy itself that it has prepared its financial statements in accordance with applicable reporting frameworks.
     
    View the BoE's further guidance on IFRS 9 and capital requirements.
     
    View details of the PRA's March 2020 Dear CEO letter on IFRS 9 and capital requirements.
     
    Details of other regulatory responses to COVID-19 are available on our COVID-19 Research Center.
     
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