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The next Prometeia challenge: IFRS 9 impairment regulation

Prometeia, global leader in Risk Management consulting and software solutions, is developing a new component of ERMAS Suite, the IFRS9 Compliance Module, to automatically deal with all aspects of the new impairment model, including data granularity, forecast of future losses, new models and simulation requirements.

With the introduction of International Financial Reporting Standards 9, banks need to change the processes that currently lead to credit impairments. The new regulation strongly affects the way credit losses are recognized in the balance sheet and P&L statement. While impairments are currently based on “incurred losses”, IFRS 9 introduces an approach based on future expectations, namely expected losses (EL).

The main impact on banks is the need to recognize EL for all financial products, and at individual and grouped-asset levels. Banks will have to update their calculation at each reporting date to reflect changes in the credit quality of their assets. This will significantly increase the number and frequency of impairment quantifications that must be undertaken and the amount of data that must be processed for such purpose.