The IFRS 9 Implementation Methodology Guidebook provides a roadmap for project managers who are overseeing their banks’ transitions from the IAS 39 to IFRS 9 accounting standard. It provides a context for the introduction of the new standard as well as a detailed outline of the new impairment model – the credit risk criteria by which accounts will be classified.
The guidebook also outlines the key challenges for banks in implementing IFRS 9 – i.e. impact on profitability and capital requirements, higher provisioning required, the need for forward looking forecasts and models that take into account a range of macroeconomic data, as well as the importance of a more rigorous data governance program.
The guidebook provides solutions to each of the above challenges, charts a roadmap and also features a checklist of all the key areas that need to be addressed, specifically in the following four areas:
- Policy & Processes
- Expected credit losses – approach & models
- Accounting integration & provisioning
- Data governance & regulatory reporting
By comparing Basel modeling requirements against that of IFRS 9, project managers will be able to understand the key differences between the two guidelines, helping them to comprehend the enhancements they need to make to current models relating to calculating probability of default, loss given default, and exposure at default.
Implementation of an IFRS 9 program is a complex exercise that requires coordination between the risk, finance and IT teams within the bank. To facilitate project management teams, the guidebook outlines the key responsibilities for each of these functions, as well as a timeline for accomplishments.
Finally, the guidebook provides a proven methodology and process for rollout, including all of the key ingredients for a successful transition to the new standard. This prescribed methodology includes all of the key capabilities that banks will need to have in the following areas to ensure a successful rollout:
- Data management
- Modeling & stress testing
- Classification
- Expected credit loss computations
- Accounting and ledger integration
- Reporting
