Stage fright: lenders still struggling with IFRS 9 transitions

Divergence in how banks move loans between stages of impairment prompts regulators to push for more homogenous approach

Financial regulators face a perennial dilemma: create rules that are too prescriptive and not all firms will be able to follow them. Allow more leeway, and firms will interpret the rules in disparate ways.

Accounting standards introduced in Europe in 2014 require banks to increase loan provisions in response to any significant deterioration in credit quality. But defining the word ‘significant’ has proven subjective, to the extent that regulators are becoming uncomfortable with the lack of