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European Savings and Retail Banking Group (ESBG)

Question 1: Is the scope of application of the guidelines appropriate and sufficiently clear?
Yes
Question 2: Is the date of application of the guidelines of 1 January 2018 appropriate?
As the EU IFRS9 endorsement process is coming to an end and there is greater certainty regarding its implementation, the date of application should be tied to the implementation date of IFRS9 within the EU, for example: “These guidelines should be implemented by 1 January 2018 (or at any later date) that being the implementation date of IFRS9 within the European Union.”
Question 3: Please provide any comments you may have on the appropriateness of the proposed proportionality approach.
Regarding the application of the proportionality principle we would like to point out that this should be applied on the individual bank or portfolio level, also where the bank or portfolio is part of a larger banking group. The challenges regarding developing sophisticated measures and obtaining most comprehensive information arise at the level of the individual bank or portfolio, even if this is part of a larger operation.
Question 4: Do you agree with the draft guidelines which introduce the relevant BCBS Guidance in the EU regulatory framework? Are there additional issues for which the EBA Guidelines should be amended in the context of finalising the guidelines?
The guidelines put restrictions on banks’ access to apply choices located in IFRS 9. This is has caused some concern amongst members. We do not think that possible choices, within an approved IFRS, should be restricted.
The guidelines should at least include a statement clarifying that, should there be any conflicts between the guidelines and the IFRS9/IFRIC statements related to IFRS9, the latter should prevail.
Principle 8, regarding disclosure, should not request disclosures beyond the requirements in IFRS7 and CRR pillar 3. The text of the guideline could be interpreted as partly extending such requirements – especially 81 and 83. Our members are of the opinion that it would be preferential if the guidelines only included:
• high level disclosure principles, and
• A request to comply with all relevant accounting rules and regulatory requirements.
As an alternative, the text could include a clear statement that the guidelines do not request any disclosure beyond the requirements in the applicable accounting and regulatory rules.
Question 5: Do you agree with the impact assessment and its conclusions, having regard to the baseline scenario used for this impact assessment? Please provide any additional information regarding the costs and benefits from the application of these guidelines.
No comment
Question 6: Please provide any additional comments on the draft guidelines.
In part 4.3 of the guidelines there are interpretations regarding how to implement and practice IFRS9. Members are of the opinion that the interpretations of IFRS should be the responsibility of the IFRS Interpretations Committee (IFRIC) thus avoiding conflicting views between the guidelines and IFRS/IFRIC.
The general rules outlined regarding the risk management seem to be duplicative with respect to existing regulation. EBA should provide clear references to existing rules and interpretations and clarify whether any existing rules, guidance or interpretation are superseded with this guideline, or whether this provides simply additional interpretation. This will also make it easier for firms to link the content of the EBA guideline to the existing rule framework. EBA should seek to ensure that these new guidelines do not provide any contradiction with existing rules or guidelines.
As a general point of concern we point out that IFRS9 is a completely new and untested standard. Only limited impact studies exist. In particular it is unknown how the standard will operate in deteriorating economic conditions. Many market participants and observers expect a strongly cyclical, or even pro-cyclical (i.e. amplifying the cycle), behavior and influence. At the same time a common interpretation of key features of the Standard has not yet been achieved. This will only be possibly after its practical application.
Consequently we encourage the EBA
• to ensure that any cyclical impacts on bank capital are minimized from adoption and in continuous application of IFRS9. This would be to the benefit of the general economy and the financial system as a whole.
• to allow firms to adopt to a common and practically workable interpretation of the standard over time in dialogue with its auditors.
Contact name
Seán Doyle