The PRA has published a note for non-executive directors who sit on the board of a firm that is affected by the implementation of International Financial Reporting Standard (IFRS) 9, particularly those who sit on their firm’s audit committee.
The note discusses four questions that non-executive directors should discuss with their board:
- What is your firm’s approach to transitional arrangements?
- Does your board understand the impact of the new provisioning for expected credit loss (ECL) and how it affects different types of lending and overall capital planning – both in business-as-usual and stressed conditions?
- Is your firm’s governance upgraded sufficiently to cope with the higher volume of forward-looking credit risk data?
- Will disclosures enable investors and other users of financial data to transition effectively to IFRS 9?
The PRA also briefly sets out its expectations of audit committees in the implementation of IFRS 9. In particular, the PRA states:
“A priority for 2018 and beyond, will be to identify and replace tactical solutions adopted to implement ECL on time where they may be unduly approximate, or might not hold in less benign conditions. We will be looking to audit committees to play an active role to monitor that this happens on a timely basis so that, at all times, the ECL is fit for purpose.”
View Getting ready for IFRS 9 – a note for non-executive directors, 27 October 2017