Prague Economic Papers 2021, 30(4):449-469 | DOI: 10.18267/j.pep.775

Impact of Implementation of IFRS 9 on Czech Banking Sector

Oµga Pastiranováa, Jiří Witzany ORCID...a
a Faculty of Finance and Accounting, Prague University of Economics and Business, Prague, Czech Republic

 The aim of this study is to provide an overview of the principles of IFRS 9 implementation and to analyse its impact on the Czech banking sector. Unlike the previous IAS 39 standard, valid until the end of 2017, the new accounting rules require banks to estimate forward-looking expected credit losses (ECL) while considering relevant exposure level information as well as available macroeconomic predictions. Due to the increased complexity of the ECL models and changing macroeconomic expectations, we hypothesize that the new standard leads to increased volatility of loan loss allowances. This hypothesis is empirically tested and more or less confirmed by an analysis of the quarterly flows of allowances for a sample of large Czech banks from the years 2016-2017 under IAS 39 and from 2018-2019 under IFRS 9.

Keywords: IFRS 9, banks, expected credit loss, loan loss allowances
JEL classification: G12, G21, G32

Received: December 23, 2019; Revised: February 25, 2021; Accepted: April 29, 2021; Prepublished online: May 27, 2021; Published: August 31, 2021  Show citation

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Pastiranová, O., & Witzany, J. (2021). Impact of Implementation of IFRS 9 on Czech Banking Sector. Prague Economic Papers, 30(4), 449-469. doi: 10.18267/j.pep.775
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