The World Bank's Financial Sector Advisory Center (FinSAC)* based in Vienna organized a successful seminar on Credit Risk Management and Regulatory Provisioning in an International Financial Reporting Standards (IFRS) Environment on October 21-22, 2014 hosted at the Austrian Federal Ministry of Finance in Vienna.
More than forty-five senior participants from central banks and regulatory agencies from ten countries in the Europe and Central Asia (ECA) region, international financial institutions (IFIs) and the Austrian Ministry of Finance attended this event.
The General Director of Economic Policy of the Ministry, Mr. Harald Waiglein, opened the seminar with some welcoming remarks, pointing to the importance of the topics to be discussed, in particular the central role of good credit risk management in view of the many regulatory and institutional changes taking place in the European Union. He highlighted the importance the Austrian authorities give to the development of a strong and resilient banking sector in the region.
The seminar had three main objectives. First, to provide an overview of current regulatory practices for defining and provisioning non-performing loans (NPL) in the Europe and Central Asia region. Second, to provide an overview of the current commercial banks’ IFRS provisioning practices. And finally, to discuss the pre-requisites and strategies for better aligning regulatory and IFRS provisioning incentives and practices and for the strategies being followed to accommodate traditional regulatory provisioning systems and IFRS provisioning in view of the new IFRS 9 standard.
The Seminar discussed the importance of having common definitions and the early recognition of credit losses ; the experience and supervisory lessons from some crisis countries with asset quality review programs, in particular the cases of Spain and Ireland, and their loan loss provisioning practices; the question of home-host cooperation and consolidation of financial and regulatory reports; the implementation considerations of the new IFRS 9 standard (**); the modelling of credit losses from the perspective of commercial banks, regulators and IFIs; the main policy alternatives and strategies for implementing reforms in accounting, disclosure, prudential supervision and reporting.
Regulators, international financial institutions (International Monetary Fund and the World Bank), the European Banking Authority (EBA), central and commercial bankers, consultancy firms and rating agencies, provided their perspectives on IFRS provisioning, NPL identification and regulatory provisioning.
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*The Financial Sector Advisory Center (FinSAC) is a World Bank unit based in Vienna supported by the Austrian Federal Ministry of Finance. FinSAC provides technical assistance to central banks and supervisory authorities in the European and Central Asia region in the areas of financial stability and banking supervision. Read more