Frankfurt — European banks expect new accounting rules due in 2018 to eat into their capital and push up the amount of money they must set aside against bad loans by nearly a fifth, a survey by the EU’s banking watchdog shows. The new International Financial Reporting Standards (IFRS 9) aim to make banks safer and to avoid a repeat of the 2007-09 crisis by requiring them to put aside money for loan losses much sooner than at present. But these rules may add to the woes of banks that have high levels of soured credit and are struggling to raise capital, which forced Spain’s Banco Popular and two Italian banks out of business in recent weeks. Two-thirds of banks surveyed by the European Banking Authority (EBA) said they expected their provisions to go up by as much as 18% as a result. The average respondent envisaged a 13% increase. The expected effect on provisions was lower than in the previous survey, which the EBA said might be due to banks’ progress in adapting to the new standar...
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.
Subscribe now to unlock this article.
Support BusinessLIVE’s award-winning journalism for R129 per month (digital access only).
There’s never been a more important time to support independent journalism in SA. Our subscription packages now offer an ad-free experience for readers.
Cancel anytime.
Questions? Email helpdesk@businesslive.co.za or call 0860 52 52 00. Got a subscription voucher? Redeem it now.