October 11, 2016
The Basel Committee on Banking Supervision today released a consultative document and a discussion paper on the policy considerations related to the regulatory treatment of accounting provisions under the Basel III capital framework.
The International Accounting Standards Board (IASB) and the US Financial Accounting Standards Board (FASB) have finalised provisioning standards based on expected credit loss (ECL). The Committee supports the use of ECL approaches and encourages their application in a manner that will achieve earlier recognition of credit losses than incurred loss models while also providing incentives for banks to follow sound credit risk management practices.
The consultative document sets out the proposal to retain, for an interim period, the current regulatory treatment of provisions. The Committee is seeking comments on whether any transitional arrangements are warranted to allow banks time to adjust to the new ECL accounting standards. The Committee has also issued a discussion paper on policy options for the long-term regulatory treatment of provisions under the new ECL standards.
The Committee welcomes comments from the public on all aspects of the proposals described in these documents. Comments on the proposals should be uploaded here by 13 January 2017.
Find the original press release here.