The PRA has published a Dear CFO letter setting out its expectations as to the minimum transition disclosures for International Financial Reporting Standard 9’s expected credit loss accounting (ECL) requirements.

The Dear CFO letter is addressed to the larger UK-headquartered credit institutions (Barclays Bank, HSBC, Lloyds Banking Group, Nationwide Building Society, Royal Bank of Scotland, Santander UK and Standard Chartered Bank). The expectations the PRA sets out in the Dear CFO letter are likely to be of some relevance to other credit institutions, particularly those that manage their investor-base actively but, as the PRA has not discussed transition disclosure with those firms, it is not addressing the expectations to them.

The Dear CFO letter covers:

  • the objective of transition disclosures. The objective is to help market participants understand how ECL works, what its implications are, and what the implications are of the choices the firm has made in implementing ECL. Among other things ECL’s implications can differ from product to product, meaning that balance sheet-level disclosures can be significantly affected by product mix. Where major products or portfolios are involved, the transition disclosures will draw out the differences;
  • general comments about the transition disclosures. In particular, the PRA discusses when and where the transition disclosures will be published. It also briefly comments on audit, materiality and consistency;
  • the content of the minimum transition disclosures; and
  • quantitative measurement uncertainty and sensitivity disclosures.

View PRA Dear CFO letter – Transition disclosures for IFRS 9 ‘Financial Instruments’, 8 January 2018