IFRS 9 hits standardised banks harder than IRB peers

Capital wallop over eight times greater for SA banks than IRB

European standardised approach (SA) banks suffered a capital drain from the switch to accounting standard IFRS 9 over eight times larger than that experienced by internal ratings-based (IRB) lenders, a European Banking Authority (EBA) study shows.

Those firms that use their own models to generate capital requirements averaged a 19-basis point drop in their Common Equity Tier 1 (CET1) capital ratios, whereas those using regulator-set formulas under the SA reported an average fall of 157bp.

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