Only Blunt Tools Left? How IFRS 9 Affects the Earnings and Capital Management of European Banks

Kund, Arndt-Gerrit; Neitzert, Florian

doi:10.2139/ssrn.3700545

Cited by 2 publications

(5 citation statements)

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“…2019; Buesa et al. 2020; Kund and Neitzert 2020). Kund and Rugilo suppose that IFRS 9 leads to a decrease in the ‘cliff effects’ 1 and a sudden increase in impairments as it ‘front‐loads’ 2 the recognition of losses.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Since then, three periods of annual financial statements have been published under the application of IFRS 9. Much research in recent years has focused on the differences in the impairments and regulatory capital impact (ECB 2017;EBA 2018;Löw et al 2019;Kund and Neitzert 2020;Oberson 2021;Caruso et al 2021). Although a partial increase in average impairment per loan has been perceived, predominantly more adequate recognition over time has been observed (EY 2018;Gomaa et al 2019;Buesa et al 2020;Kund and Neitzert 2020).…”

Section: Literature Reviewmentioning

confidence: 99%

“…Much research in recent years has focused on the differences in the impairments and regulatory capital impact (ECB 2017;EBA 2018;Löw et al 2019;Kund and Neitzert 2020;Oberson 2021;Caruso et al 2021). Although a partial increase in average impairment per loan has been perceived, predominantly more adequate recognition over time has been observed (EY 2018;Gomaa et al 2019;Buesa et al 2020;Kund and Neitzert 2020). Kund and Rugilo suppose that IFRS 9 leads to a decrease in the 'cliff effects' 1 and a sudden increase in impairments as it 'front-loads' 2 the recognition of losses.…”

Section: Literature Reviewmentioning

confidence: 99%

“…In the above formula, t = 1,…,T to represent future years. Accordingly, PD corresponds to the probability of no default in the previous years 1 to t− 1 and a resulting default in the specific year t (Kund and Neitzert 2020; Gubareva 2021). Therefore, no loss identification period has to be assessed under IFRS 9.…”

Section: Measurement Categories – Transition From Ias 39 To Ifrsmentioning

confidence: 99%

“…Much research in recent years has focused on the differences in the impairments and regulatory capital impact (ECB 2017; EBA 2018; Löw et al. 2019; Kund and Neitzert 2020; Oberson 2021; Caruso et al. 2021).…”

Section: Literature Reviewmentioning

confidence: 99%

See 4 more Smart Citations

Long and Short‐term Investments by European Banks – Trends Since the IASB Published IFRS 9

Löw

Erkelenz

2022

Australian Accounting Review

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IFRS 9 was introduced by the IASB in 2014 with a mandatory application in 2018. Three years later the IASB started a post‐implementation review project. Major concerns at a political level and from the (insurance) industry were raised about long‐term investment strategies that appear less favourable due to new measurement categories and impairment rules. Furthermore, it was expected that the new rules on categorisation would create more profit or loss (P/L) volatility. We show that concerns about banks' decreasing maturity investment behaviour and increased profit or loss volatility since the publication of IFRS 9 in 2014 could not be verified until 2020. Additionally, banks hardly use the fair value option in practice, which suggests it can be abolished. Finally, the paper finds that the fair value through other comprehensive income option for equity instruments has almost no importance for banks. The IASB should, therefore, abolish this category as well. Hence, the measurement categories could be reduced by two categories reducing complexity and increasing the decision usefulness of financial instruments accounting rules for investors.

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Section: Literature Reviewmentioning

confidence: 99%