RiskTech Forum

Wolters Kluwer: IFRS 9 and Regulatory Reporting in Asia - Twin Tracks, Combined Impact

Posted: 1 May 2017  |  Source: Wolters Kluwer

By now, most financial institutions in Asia are aware of the major regulatory initiatives set to reshape the sector over the next few years, and are likely in the midst of preparations. Arguably towering over all others in terms of ambition and urgency is International Financial Reporting Standard (IFRS) 9, the new International Accounting Standards Board (IASB) - backed benchmark for the accounting of financial instruments taking effect from 2018.

At the same time, mindful of continuing governance lapses in the financial industry and seeking to bring their regimes in line with tougher global standards, regional regulators are raising the bar for information that needs to be reported by banks. The forms that institutions provide to regulators are set to change significantly, and banks will have to tweak their systems to generate new indicators, calculations or aggregations that will (in theory) provide a more accurate picture of their financial health and risk positions.

IFRS 9 and regulatory reporting enhancements are in essence born from the same goal – to clearly understand, report and mitigate the risks taken – and are part of a wider regulatory drive to promote transparency and resiliency in the financial sector after the recent global financial crisis. Nonetheless, in most cases accounting and reporting standards are being overhauled separately. Similarly, many institutions are developing separate approaches, and even pursuing separate technological initiatives, to achieve compliance with revised reporting and accounting standards.

In this paper we will argue that IFRS 9 and the changes to regulatory reporting need to be viewed holistically, and that the former is set to have a profound impact on the latter. Using concrete examples from reporting forms around the region, we will demonstrate how IFRS 9 is set to reshape the reporting process, requiring more complex and detailed data points from banks. And we will show that by anticipating and planning for the ‘next wave’ of regulatory change – i.e. further reporting enhancements driven by IFRS 9 standards – institutions can ensure they remain at the forefront of the compliance curve.

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