scholarly journals Preliminary impact of IFRS 9 implementation on the Lebanese banking sector

2021 ◽  
Vol 20 (3) ◽  
pp. 369-401
Author(s):  
Darine Dib ◽  
◽  
Khalil Feghali
Keyword(s):  
Banking Sector ◽  
Current Account Deficit ◽  
Research Question ◽  
Balance Sheet ◽  
Theoretical Aspect ◽  
Capital Inflows ◽  
Reporting Standard ◽  
International Financial Reporting Standard ◽  
Ifrs 9 ◽  
The Impact

Research Question: What is the impact of the new requirements of the expected credit loss (ECL) model on the Lebanese banking sector? Motivation: In spite the expansion of research in respect of International Financial Reporting Standard N0. 9 (IFRS 9) in the past few years, it is still in its infancy in developing countries. Meanwhile, empirical IFRS 9 studies for banks is yet considered little as compared to the theoretical aspect. Our study seeks to fill this gap by testing the impact of IFRS 9 on the Lebanese banking sector. This paper is the first comprehensive attempt to empirically assess the estimated impact of IFRS 9 as disclosed in the 2017 financial statements. Idea: This study examines if the increase in provision based on the new ECL is strongly positively related to the average credit losses for the last 5 years, the current provisions level for the loans portfolio, the portfolio of investment securities, and the portfolio of liquid assets. Data: The data were collected from 19 consolidated banks representing 91% of the total consolidated balance sheet of all Lebanese banks. Tools: To test study’s hypotheses, we applied linear regression using SPSS. Findings: Two main results can be derived: First, we found that the impact of the new ECL model is not material to the banks’ equity if we consider the excess regulatory provisions booked in anticipation of IFRS 9. Second, we found that the increase in provision based on the ECL model is strongly positively related to the portfolio of investments securities and negatively related to the historical credit loss ratio. Contribution: Empirical IFRS 9 studies for banks is yet considered little as compared to the theoretical aspect. Our study seeks to fill this gap by testing the impact of IFRS 9 on the Lebanese banking sector. The Lebanese banks are an interesting case because they play a key role in the Lebanese economy, acting as the main channel for capital inflows into the country and financing the largest part of the government’s current account deficit.

scholarly journals Internal model for IFRS 9 - Expected credit losses calculation

2018 ◽  
Vol 69 (3) ◽  
pp. 269-297 ◽  
Author(s):  
Hrvoje Volarević ◽  
Mario Varović
Keyword(s):  
Financial Reporting ◽  
Internal Model ◽  
Balance Sheet ◽  
Analytic Hierarchy ◽  
Reporting Standard ◽  
International Financial Reporting Standard ◽  
External Data ◽  
Simple Implementation ◽  
Ifrs 9 ◽  
Credit Losses

This article explores and analyzes the implementation problem of International Financial Reporting Standard 9 (IFRS 9) which is in use from 1 January 2018. IFRS 9 is most relevant for financial institutions, but also for all business subjects with a significant share of financial assets in their Balance sheet. The main objective of this article is the implementation of new impairment model for financial instruments, which is measurable through Expected Credit Losses (ECL). The use of this model is in correlation with a credit risk of the company for which it is necessary to determine basic variables of the model: Exposure at Default (EAD), Loss Given Default (LGD) and Probability of Default (PD). Basel legislation could be used for LGD calculation while PD calculation is based on specific methodology with two different solutions. In the first option, PD is taken as an external data from reliable rating agencies. When there is no external rating, an internal model for PD calculation has to be created. In order to develop an internal model, authors of this article propose application of multi-criteria decision-making model based on Analytic Hierarchy Process (AHP) method. Input data in the model are based on information from financial statements while MS Excel is used for calculation of such multi-criteria problem. Results of internal model are mathematically related with PD values for each analyzed company. Simple implementation of this internal model is an advantage compared to other much more complicated models.

scholarly journals Methods of Calculation of Expected Credit Losses Under Requirements of IFRS 9

2019 ◽  
Vol 13 (4) ◽  
pp. 74-86
Author(s):  
Alfiya Vasilyeva ◽  
Elvina Frolova
Keyword(s):  
Credit Risk ◽  
Financial Reporting ◽  
Time Lag ◽  
Reporting Standard ◽  
International Financial Reporting Standard ◽  
Macroeconomic Factors ◽  
Credit Risks ◽  
Ifrs 9 ◽  
The Impact ◽  
Credit Losses

The most important area of work for financial market regulators including International Accounting Standards Board is to clarify the metrics of credit assessment. This problem became particularly relevant after the financial crisis of 2008, when the insolvency of approaches to the assessment of credit risks adopted under the then international financial reporting standard IFRS (IAS) 39 became apparent, since credit losses on financial instruments were taken into account by the “loss model”, and therefore, the asset was recognized as financially impaired due to the fact of credit quality deterioration and significant time lag. From 1 January 2018 of a new international financial reporting standard IFRS9 IFRS 9 is based on a different approach — the principle of “expected credit losses” (ECL). The transition to IFRS 9 is intended to strengthen the banking system by increasing reserves , the banking system’s stability can be increased also. The new business model radically changes the approach to the formation of reserves, including by taking into account the impact of macroeconomic indicators on their value. According to various estimates, the scale of increase in reserves ranges from 30% to 50%. The purpose of this article is to systematize the methodological principles and approaches that underlie the requirements of IFRS 9 (basic and simplified and POCI approaches), as well as a comparison of the main methods for assessing the probability of default and expected credit losses (Weibul distribution, migration matrix, generator matrix ) In the framework of this article, the authors formulated criteria for the transfer of assets between the stages of credit risk (stage), and also formulated the principles for calculating expected credit risks for each stage, taking into account macroeconomic factors. This article is of practical value, as it can be the basis for the development of methods for calculating the expected credit risks of corporate clients of commercial banks, and can also be used to improve credit risk management models.

scholarly journals The Effects on Financial Leverage and Performance: The IFRS 16

2018 ◽  
Vol 11 (8) ◽  
pp. 76
Author(s):  
Francesca Magli ◽  
Alberto Nobolo ◽  
Matteo Ogliari
Keyword(s):  
Balance Sheet ◽  
Financial Statements ◽  
Listed Companies ◽  
Accounting System ◽  
Financial Leverage ◽  
Reporting Standard ◽  
International Financial Reporting Standard ◽  
Accounting Standard ◽  
And Performance ◽  
The Impact

This paper analyses the potential impacts of the introduction of a new accounting standard, International Financial Reporting Standard 16 (IFRS 16) – Leases, on financial leverage and performance of entities. This new accounting standard was introduced on 13 January 2016, and will become effective on 1 January 2019; it will have material impacts on the financial statements of listed companies adopting IFRS and change the basic principles of the current accounting system. Our aim is to estimate the impacts of the application of IFRS 16 on listed issuers of financial statements and the different impacts that the new standard could have in different activity sectors. This research estimates the effects of IFRS 16 on the ratios of debt/total assets, EBITDA/revenues and debt/equity. The conclusions summarize the effects on entity performance and net financial position. The research shows that in the financial statements of the lessee, there will be important changes. In particular, in the balance sheet, there will be an increase in lease assets, an increase in financial liabilities and a decrease in equity, while in the income statement, there will be an increase in EBITDA and an increase in finance costs. The impact of the application of IFRS 16 will be different depending on the use of operating lease contracts among the different business sectors. Leases are an important and flexible source of financing; listed companies, using IFRS and U.S. GAAP, are estimated to have around US$ 3.3 trillion in lease commitments. Finally, this study aims to analyse the possible impacts of communication of entities, focusing on alternative performance measures.

scholarly journals Adapting the Default Weighted Survival Analysis Modelling Approach to Model IFRS 9 LGD

Risks ◽  
2021 ◽  
Vol 9 (6) ◽  
pp. 103
Author(s):  
Morne Joubert ◽  
Tanja Verster ◽  
Helgard Raubenheimer ◽  
Willem D. Schutte
Keyword(s):  
Survival Analysis ◽  
Financial Reporting ◽  
Proportional Hazards ◽  
Proportional Hazards Model ◽  
Survival Curve ◽  
Cox Proportional Hazards ◽  
Cox Proportional Hazards Model ◽  
Reporting Standard ◽  
International Financial Reporting Standard ◽  
Ifrs 9

Survival analysis is one of the techniques that could be used to predict loss given default (LGD) for regulatory capital (Basel) purposes. When using survival analysis to model LGD, a proposed methodology is the default weighted survival analysis (DWSA) method. This paper is aimed at adapting the DWSA method (used to model Basel LGD) to estimate the LGD for International Financial Reporting Standard (IFRS) 9 impairment requirements. The DWSA methodology allows for over recoveries, default weighting and negative cashflows. For IFRS 9, this methodology should be adapted, as the estimated LGD is a function of in the expected credit losses (ECL). Our proposed IFRS 9 LGD methodology makes use of survival analysis to estimate the LGD. The Cox proportional hazards model allows for a baseline survival curve to be adjusted to produce survival curves for different segments of the portfolio. The forward-looking LGD values are adjusted for different macro-economic scenarios and the ECL is calculated for each scenario. These ECL values are probability weighted to produce a final ECL estimate. We illustrate our proposed IFRS 9 LGD methodology and ECL estimation on a dataset from a retail portfolio of a South African bank.

scholarly journals Assessing the Impact of Corporate Governance Index on Financial Performance in the Romanian and Italian Banking Systems

2021 ◽  
Vol 13 (10) ◽  
pp. 5535
Author(s):  
Marco Benvenuto ◽  
Roxana Loredana Avram ◽  
Alexandru Avram ◽  
Carmine Viola
Keyword(s):  
Corporate Governance ◽  
Financial Performance ◽  
Banking Sector ◽  
Research Question ◽  
Interactive Effect ◽  
Banking System ◽  
Capital Adequacy ◽  
Banking Systems ◽  
Governance Index ◽  
The Impact

Background: Our study aims to verify the impact of corporate governance index on financial performance, namely return on assets (ROA), general liquidity, capital adequacy and size of company expressed as total assets in the banking sector for both a developing and a developed country. In addition, we investigate the interactive effect of corporate governance on a homogenous and a heterogeneous banking system. These two banking systems were chosen in order to assess the impact of corporate governance on two distinct types of banking system: a homogenous one such as the Romanian one and a heterogeneous one such as the Italian one. The two systems are very distinct; the Romanian one is represented by only 34 banks, while the Italian one comprises more than 350 banks. Thus, our research question is how a modification in corporate governance legislation is influencing the two different banking systems. The research implication of our study is whether a modification in legislation, thus in the index of corporate governance, is feasible for two different banking sectors and what the best ways to increase the financial performance of banks are without compromising their resilience. Methods: Using survey data from the Italian and Romanian banking systems over the period 2007–2018, we find that the corporate governance has a significant, positive and long-lasting effect on profitability and capital adequacy in both countries. Results: Taking the size of the company into consideration, the impact of the Index of Corporate Governance (ICG) on a homogenous banking system is positive while the impact on a heterogeneous banking system is negative. Conclusions: Our study provides evidence of the impact of IGC on financial performance and sheds light on the importance of the size of the company. Therefore, one can state that the corporate governance principles applied do not encourage the growth of large banks in heterogeneous banking sectors, thereby suggesting new avenues of research associated with new perspectives.

scholarly journals Analysis of the Impact of External Shocks on the Russian Banking System in the XXI Century

2019 ◽  
Vol 13 (4) ◽  
pp. 51-61
Author(s):  
O. S. Kochetovskaya
Keyword(s):  
Banking Sector ◽  
Debt Crisis ◽  
Banking System ◽  
Capital Inflows ◽  
External Financing ◽  
External Shocks ◽  
The Usa ◽  
European Debt Crisis ◽  
Favorable Conditions ◽  
The Impact

The main objective of the study was the identification of the key channel of impact of positive and negative external shocks on the Russian banking system for the period from 2000 to 2017. In conducting the study the author used systematic and statistical methods of analysis. Throughout the named period, the banking sector of Russia was always under the influence of one or another external shock: rising and falling oil prices; favorable conditions for obtaining financing on the global capital market; the global financial and economic crisis; the European debt crisis; the tapering of the quantitative easing policy in the USA; sanctions imposed on Russia by the Western countries. In the pre-crisis period, capital inflows became the main channel for the transmission of external shock. In the course of the European debt crisis, problems with attracting external financing became a key channel for the transfer of external shock. During the global crisis and the crisis of 2014–2016 the channels of transmission of external shocks to the banking sector of Russia, despite various causes, were in many ways similar. So, the main channels were the outflow of capital, the restriction of external financing, the collapse of the ruble exchange rate, and the state of confidence in the banking sector.

Factors influencing customers’ selection of Islamic home financing: a systematic review

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Norhazlina Ibrahim ◽  
Safeza Mohd Sapian
Keyword(s):  
Banking Sector ◽  
Data Extraction ◽  
Research Question ◽  
Past Research ◽  
Theoretical Development ◽  
Future Research ◽  
Reporting Standard ◽  
Content Type ◽  
Research Fields ◽  
Factors Influencing

Purpose This study, using systematic literature review (SLR) aims to highlight and summarise current studies on the factors influencing customers’ Islamic home financing (IHF) selection and Islamic banking product preference, which has gained popularity within the banking sector over the past three decades. The SLR could map evolution and research fields, recommend a particular categorisation and determine primary issues to demonstrate current trends, future research directions and theoretical development. Design/methodology/approach The SLR was performed with a four-step reporting standard for the systematic evidence syntheses review method (research question formulation, systematic searching, quality assessment and data extraction) using 33 screened articles between 2008 and 2020 from two primary databases (Scopus and Web of Science) and one supporting database (Google Scholar). Findings The resulting factors could be categorised into four primary themes: consumer behaviour, consumer attributes, bank attributes and bank attributes (Islamic). The themes were subsequently divided into 16 sub-themes. Notably, all the factors proved essential for consumers’ evolving preferences and product competitiveness in the market. Research limitations/implications This study encountered two limitations based on database selection and research period. Practical implications This SLR aimed to offer useful insights into the factors that should be prioritised by financial institutions for marketing approaches by investigating consumer behaviours. Originality/value This study pioneered an SLR on the study area for useful insights into the current research limitations and recommendations on future study directions. Specifically, the study method facilitated critical discussions and comparisons to past research outcomes and objectivity with triangulation from distinct perspectives.

Quality and quantity of FTSE-100 segmental information reporting

2019 ◽  
Vol 32 (3) ◽  
pp. 326-343 ◽  
Author(s):  
Ghassan H. Mardini ◽  
Sameh Ammar
Keyword(s):  
Financial Reporting ◽  
Boards Of Directors ◽  
Stock Exchange ◽  
Reporting Standard ◽  
International Financial Reporting Standard ◽  
Content Type ◽  
Information Reporting ◽  
Ifrs 8 ◽  
The Uk ◽  
The Impact

Purpose This study aims to explore the impact of international financial reporting standard no. 8 (IFRS 8) on segmental information reporting (SIR) after the post-implementation review (PIR) issued by international accounting standards board (IASB). This impact is examined in relation to quality and quantity as SIR dimensions represent, respectively, the level of reported items and segments. As a complement to this, the chief operating decision maker (CODM) identity is considered to understand the patterns of SIR dimensions. Design/methodology/approach The SIR of the UK financial times stock exchange 100 (FTSE-100) listed companies over the period 2013-2016 is the research’s scope. Several criteria were developed to ensure a representative research sample. A disclosure index approach was used facilitating the use of content analysis for data collection, which pertained to the dimensions of SIR published by the FTSE-100 following IFRS 8 PIR. Findings The IFRS 8 PIR has had several implications shaping the growing trend that is underpinned by the SIR dimensions published by FTSE-100 companies. First, the SIR quantity dimension positively corresponds over 2013-2016, but it still does not meet IASB’s demands. This, secondly, also applies to the quality dimension of SIR to uncover inconsistency with the existing knowledge being held regarding the introduction of IFRS 8. More specifically, the response of the FTSE-100 to mandatory and voluntary items seems to be in transition of substitution. Third, CODM’s identity was an insightful dimension in rationalising the understanding through the aforementioned dimensions. It is undertaken by boards of directors or executive committees and the case of the latter is associated with more disclose in relation to the CODM’s identity. Practical implications These findings reveal implications to: academics undertaking further research about IFRS 8 PIR to challenge or endorse this conclusion, using similar or alternative approaches; the stakeholders’ decision-making process; and policymakers to re-think the structure of mandatory and voluntary items. Originality/value This paper provides empirical evidence on the quality and quantity of SIR published by FTSE-100 companies following IFRS 8 PIR.

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