PRA publishes guidance on the application of IFRS 9 for payment deferrals
12 June 2020
The Prudential Regulation Authority (PRA) has sent a letter to chief executive
officers of UK banks providing guidance on how to account for the ending of
initial payment deferrals offered due to COVID-19.
Previous guidance was provided in March 2020 containing, amongst other things, the approach that
should be taken by banks, building societies and PRA-designated investment firms in
assessing expected loss provisions under IFRS 9 Financial Instruments. The
aim of the guidance was to ensure that the requirements of IFRS 9 were applied in a
consistent way and avoid the risk that they approach the standard differently
potentially leading to inappropriate or inconsistent levels of expected credit
losses.
The March guidance related to payment holidays, moratoria or deferrals. As the first
payment deferrals are now coming to an end, the FCA has published updated guidance (link to FCA website) on how lenders
should treat the payment deferrals at the end of the initial deferral period. The
guidance issued by the PRA is intended as an update to the March guidance to address
the accounting consequences of exits from initial payment deferrals.
Click here for the guidance in PRA website.