KUALA LUMPUR, Aug 8 — Asia Pacific banking systems are making good progress in the implementation of the International Financial Reporting Standard (IFRS) 9 accounting standard, according to Moody’s Investors Service.
However, the bond credit rating, in a statement, said not all disclosure standards are being met yet.
“So far, 11 of the 17 Apac banking systems that we cover have made the switch to the new regime, and our analysis of 36 major rated banks in the region confirms our earlier view that the switch has led to a mild increase in credit reserves,” Moody’s vice president and senior credit officer Eugene Tarzimanov said.
Its analysis also unveils significant variations in reporting practices, with some banks not meeting the disclosure object of the standard.
Tarzimanov pointed out that most banks have weak disclosures on the inputs and criteria they use for Stage 2 and Stage 3 classifications and on the rules they use for moving assets across stages.
On the positive note, he said all banks in Moody’s sample disclose the three credit stages of loans in their annual reports, as well as the related expected credit losses.
“From a credit perspective, asset movements between Stages 1 and 2 have a significant impact on expected credit losses, while asset movements from Stage 2 to 3 affect problem loan metrics,” Moody’s vice-president and senior accounting analyst Maria Mazilu said.
Among the banks it assessed, Moody’s noted the major banks in Hong Kong are best-in-class because they provide far more granular information on their expected credit loss models, including their sensitivity to different scenarios.
The IFRS replaces the previous International Accounting Standard 39, and changes the way banks report the credit quality of debt-like assets, how they create provisions against credit losses, and how they classify and measure financial assets. — Bernama