Global assessment of the COVID-19 impact on IFRS 9 loan loss provisions
Asian Review of Accounting
; 31(1):26-41, 2023.
Article
in English
| ProQuest Central | ID: covidwho-2229762
ABSTRACT
PurposeThis article aims to analyze the impact of COVID-19 measures by governments and central banks on International Financial Reporting Standards (IFRS) 9 loan loss provisions (LLPs). Changes in the total amount of LLPs, distribution of outstanding loan balance among IFRS 9 stages and credit risk parameters used for calculation are investigated for each world region where banks report under IFRS.Design/methodology/approachData for a global selection of 105 banks reporting under IFRS were collected from 2019 to 2020 annual reports, financial statements, and Pillar III reports. These data provide the basis to empirically analyze the impact of COVID-19 on LLPs.FindingsIn most world regions Stage 2 balances increase while Stage 3 balances remain comparatively stable. The credit risk parameters used for computing LLPs remained stable in 2020. However, in China, the impact of COVID-19 on banks was not detected. Mean Stage 1 balances for Chinese banks increased slightly during the pandemic. Aside from the COVID-19 impact, we find that LLPs, credit risk parameters, and loss absorption capacities are significantly lower for banks in Canada, Oceania and Western Europe compared to those in the rest of the world.Originality/valueThere exists previous research examining the COVID-19 impact on financial stability, implementation of emergency rules and country-wide analyses to anticipate default rates depending on recovery scenarios. However, this is the first global study on the immediate impact of COVID-19 on LLPs. It reveals the significant differences between world regions and provides implications about their resilience against future credit shocks.
Business And Economics--Accounting; IFRS 9; Loan loss provisions; COVID-19; Banking industry; Credit risk; Accounting; Medical research; Loss reserves; Central banks; Interest rates; Bank reserves; Coronaviruses; Loans; Present value; Equity capital; Regulation of financial institutions; International Financial Reporting Standards; Impaired assets; 52111:Monetary Authorities-Central Bank; 52211:Commercial Banking
Full text:
Available
Collection:
Databases of international organizations
Database:
ProQuest Central
Type of study:
Experimental Studies
/
Prognostic study
Language:
English
Journal:
Asian Review of Accounting
Year:
2023
Document Type:
Article
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