Regulation 2017/2395 - Amendment of Regulation (EU) No 575/2013 as regards transitional arrangements for mitigating the impact of the introduction of IFRS 9 on own funds and for the large exposures treatment of certain public sector exposures denominated in the domestic currency of any Member State - Main contents
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Regulation (EU) 2017/2395 of the European Parliament and of the Council of 12 December 2017 amending Regulation (EU) No 575/2013 as regards transitional arrangements for mitigating the impact of the introduction of IFRS 9 on own funds and for the large exposures treatment of certain public sector exposures denominated in the domestic currency of any Member State| Legal instrument | Regulation |
|---|---|
| Number legal act | Regulation 2017/2395 |
| Original proposal | COM(2016)850  |
| CELEX number i | 32017R2395 |
| Document | 12-12-2017; Date of signature |
|---|---|
| Publication in Official Journal | 27-12-2017; OJ L 345 p. 27-33 |
| Signature | 12-12-2017 |
| Effect | 28-12-2017; Entry into force Date pub. +1 See Art 2 01-01-2018; Application See Art 2 |
| End of validity | 31-12-9999 |
27.12.2017 |
EN |
Official Journal of the European Union |
L 345/27 |
REGULATION (EU) 2017/2395 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL
of 12 December 2017
amending Regulation (EU) No 575/2013 as regards transitional arrangements for mitigating the impact of the introduction of IFRS 9 on own funds and for the large exposures treatment of certain public sector exposures denominated in the domestic currency of any Member State
(Text with EEA relevance)
THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,
Having regard to the Treaty on the Functioning of the European Union, and in particular Article 114 thereof,
Having regard to the proposal from the European Commission,
After transmission of the draft legislative act to the national parliaments,
Having regard to the opinion of the European Central Bank (1),
Having regard to the opinion of the European Economic and Social Committee (2),
Acting in accordance with the ordinary legislative procedure (3),
Whereas:
(1) |
On 24 July 2014, the International Accounting Standards Board published International Financial Reporting Standard (IFRS) 9 Financial Instruments (IFRS 9). IFRS 9 aims to improve the financial reporting of financial instruments by addressing concerns that arose in that area during the financial crisis. In particular, IFRS 9 responds to the G20’s call to move to a more forward-looking model for the recognition of expected credit losses on financial assets. In relation to the recognition of expected credit losses on financial assets it replaces International Accounting Standard (IAS) 39. |
(2) |
The Commission adopted IFRS 9 through Commission Regulation (EU) 2016/2067 (4). In accordance with that Regulation, credit institutions and investment firms (‘institutions’) that use IFRS to prepare their financial statements are required to apply IFRS 9 as of the starting date of their first financial year starting on or after 1 January 2018. |
(3) |
The application of IFRS 9 may lead to a sudden significant increase in expected credit loss provisions and consequently to a sudden decrease in institutions’ Common Equity Tier 1 capital. While the Basel Committee on Banking Supervision is currently considering the longer-term regulatory treatment of expected credit loss provisions, transitional arrangements should be introduced in Regulation (EU) No 575/2013 of the European Parliament and of the Council (5) to mitigate that potentially significant negative impact on Common Equity Tier 1 capital arising from expected credit loss accounting. |
(4) |
In its resolution of 6 October 2016 on International Financial Reporting Standards: IFRS 9 (6), the European Parliament called for a progressive phase-in regime that would mitigate the impact of the new impairment model of IFRS 9. |
(5) |
Where an institution’s opening balance sheet on the day that it first applies IFRS 9 reflects a decrease in Common Equity Tier 1 capital as a result of increased expected credit loss provisions, including the loss allowance for lifetime expected credit losses for financial assets that are credit-impaired, as defined in Appendix A to IFRS 9 as set out in the Annex to Commission Regulation (EC) No 1126/2008 (7) (‘Annex relating to IFRS 9’), compared to the closing balance sheet on the previous day, the institution should be allowed to include in its Common Equity Tier 1 capital a portion of the increased expected credit loss provisions for a transitional period. That transitional period should have a maximum duration of 5 years and should start in 2018. The portion of expected credit loss provisions that can be included in Common Equity Tier 1 capital should decrease over time down to zero to ensure the full implementation of IFRS 9 on the day immediately after the end of the transitional period. The impact of the expected credit loss provisions on... |
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