German banks will be faced with additional costs in triple-digit million euros as a result of the implementation of the new accounting rules, known as IFRS 9, from Jan. 1, 2018, according to a Nov. 27 report by Reuters, carried by Handelsblatt and citing an estimate of the Association of German Banks, BdB.
"This is a very expensive change of the value adjustment system," Dirk Jäger, head of bank supervision and accounting at the BdB was cited by the newspaper as saying.
The latest version of the International Financial Reporting Standards, which will be applied to financial institutions in Europe from next year, will require banks to hold provisions for not only nonperforming loans but also other loans in their balance sheets. Lenders also have to move to an expected-loss model rather than provide just for incurred losses as they have done so far.
The implementation of IFRS 9 is expected to affect both the banks' common equity Tier 1 ratios as well as raise their provisioning levels.
