EBA · 2018_3927 Final Q&A

IFRS 9 Transitional arrangements - Calculation of the amount of CET add-back in accordance to Article 473a – paragraph 4

Regulation
Regulation (EU) No 575/2013 (CRR)
Article
473a, para. 4
Topic
Accounting and auditing
Submitted by
Competent authority
Submitted
2018-05-23
Answered
2018-05-25
Answer provided by
ESAs (EBA, ESMA, EIOPA)
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Question

How should the amount referred to in Article 473a(4) be calculated: a) The difference between the Expected Credit Losses (ECL) at reporting date for loans that are not credit impaired and the ECL at implementation date for all the loans that are not credit impaired at the implementation date, or; b) The ECL at reporting date for loans that are not credit impaired minus the ECL at implementation date for those same loans?

Background

The second part of the value to be added to CET1 according to Article 473a(4), should be the value of expected credit loss for loans that are not credit impaired at reporting date minus the value of expected loss for loans that are not credit impaired at the transition date. Two possible interpretations as described in the question above are therefore put forward for calculating this difference.

Answer

The amounts referred to in Article 473a(3)(a) and (b) of CRR are total amounts of expected credit losses, i.e. no exposure-by-exposure assessment shall be performed. The total amounts of Stage 1 and Stage 2 Expected Credit Losses (ECL) at the reporting date, i.e. for all exposures not credit impaired at the reporting date, and the total amounts of Stage 1 and Stage 2 ECL on 1 January 2020 or on at the date of initial application of IFRS 9 , whichever is later , i.e. for all exposures not credit impaired on 1 January 2020 or on at  the date of initial application, shall be relevant for the calculation , whichever is later .  From these total amounts, where Article 468 CRR applies, expected credit losses determined for exposures measured at fair value through other comprehensive income should be excluded.

Original source: European Banking Authority, Q&A ID 2018_3927

This Q&A is published by European Banking Authority and is non-binding. It does not constitute legal advice. Updated weekly from official ESA sources.

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