BIS seeks inputs on expected credit losses

MANILA, Philippines - The Bank for International Settlements (BIS) is seeking industry inputs regarding the proposed regulations on accounting for expected credit losses. Comprising 11 fundamental principles, the proposal sets out supervisory expectations for banks relating to sound credit risk practices associated with implementing and applying an expected credit loss (ECL) accounting framework. It also covers supervisory expectations of how an ECL accounting framework should interact with a bank’s overall credit risk practices and the regulatory framework. The financial condition of a bank is highly sensitive to rapid increases in credit risk. Therefore, appropriately determining how, when and in what amount to recognize the effects of increases in credit risk should be a priority for all bank stakeholders. An ECL accounting framework reflects the fact that credit quality deteriorates far earlier than when loss events are incurred. A further important feature of an ECL accounting framework is that the assessment and measurement of ECL must take into account forward-looking information and macroeconomic factors and cannot therefore rely exclusively on current conditions and historical data.

 

Show comments