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Fourth seminar on IFRS for Prudential and Regulatory Purposes, 8-9 February 2011, Vienna

As part of the REPARIS program, the World Bank's Centre for Financial Reporting Reform (CFRR) organized a two-day seminar on the use of IFRS for prudential purposes in Vienna on 8-9 February 2011.

Fourth seminar on IFRS for Prudential and Regulatory Purposes,<br>8-9 February 2011, Vienna




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Summary


Objectives

The seminar's main objectives were to:

  • bring participants up to date with the latest developments in setting prudential regulations for banks (the Basel III rules) and EU insurance companies (Solvency II);
  • describe how the existing international reporting standard for financial instruments (IAS 39) and its proposed successor (IFRS 9) treat financial assets, illustrating this with practical examples; and
  • outline the current state of the projects to update the international reporting standard for insurance undertakings (IFRS 4).


Description

Erik van der Plaats at the fourth seminar on IFRS for Prudential and Regulatory Purposes, 8-9 February 2011, Vienna 31 participants from central banks and financial regulators from the REPARIS countries attended the seminar, which was moderated by Pascal Frèrejacque from the CFRR.

Erik van der Plaats from the Financial Stability Board (FSB) gave a summary of the FSB's history and its current priorities. He emphasized how the FSB's small size meant that it had to work closely with other bodies, especially the IMF and the Basel Committee.

Fourth seminar on IFRS for Prudential and Regulatory Purposes, 8-9 February 2011, Vienna Mr van der Plaats outlined how the authors of the new Basel III rules had introduced various counter-cyclical elements into bank capital requirements in an attempt to damp down credit booms. He emphasized that the accounting treatment of loan loss provisioning remained the same under Basel III rules. To complete the discussion, Shamim Diouman gave presentations on the revised requirements for capital adequacy in Basel III and the new liquidity requirements – the Liquidity Coverage Ratio (LCR, to be implemented from 2015) and the Net Stable Funding Ratio (NSFR, to be implemented from 2018).

Mr Diouman also separately outlined the progress made in the EU's new more risk-based system for regulating the capital adequacy of insurance undertakings (Solvency II). He drew out the similarities between the Basel III rules and Solvency II and emphasized the importance of the disclosure requirements in the new system.

Anna Czarniecka at the fourth seminar on IFRS for Prudential and Regulatory Purposes, 8-9 February 2011, Vienna On the accounting side, Mr Diouman gave a presentation on the project to draw up a new accounting standard for insurance undertakings (IFRS 4 phase II). Although the new standard was now almost complete (it is due to be finalized in 2011 and to be effective from January 2013), Mr Diouman stressed how there was a continuing debate over several elements of the new standard, especially those concerning the discount rate used and the proposed methods of risk adjustment.

Participants also benefitted from several practical sessions to illustrate the application of financial reporting standards to financial instruments and their impairment, both under the current standard (IAS39) and its proposed replacement (IFRS 9). These presentations, by Shamim Diouman and Anna Czarniecka, were complemented by a practical session, where participants analyzed recent financial statements from a major bank and a leading insurance company.

Results

Participants gained more insight into how the system of international financial regulation evolved during and following the international financial crisis. They also gained deeper knowledge of on how changes in International Financial reporting Standards (IFRS) have, and will affect the treatment of financial instruments and insurance undertakings in the near future. Comments from participants indicated that they particularly appreciated the case studies sessions during the seminar that showcase these changes. These issues have further been explored during a series of GDLN events organized in May and June 2011.

Videos


Videos of Speakers

IAS39 Examples
Anna Czarniecka

Shamin Diouman on Solvency II

Mrs Czarniecka gives examples and case studies of the application of IAS39.

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Solvency II
Shamim Diouman

Shamin Diouman on Solvency II

Mr Dioumam outlines the progress made in the EU's new more risk-based system for regulating the capital adequacy of insurance undertakings (Solvency II). He draws out the similarities between the Basel III rules and Solvency II and emphasizes the importance of the disclosure requirements in the new system.

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The G20 and the FSB
Erik van der Plaats

Shamin Diouman on Solvency II

Mr. Van der Plaats gives a summary of the FSB's history and its current priorities.

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Insurance Contracts IFRS 4 Phase II
Shamim Diouman

Shamin Diouman on Solvency II

Mr Doiumam gives a presentation on the project to draw up a new accounting standard for insurance undertakings (IFRS 4 phase II).

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