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REPARIS Workshop for Banking Regulators on IFRS

April 18-19 2012, Croatian National Bank, Zagreb


As part of the REPARIS program, the CFRR, in co-operation with the Croatian National Bank (CNB), organized a two-day workshop on the implications of current developments in International Financial Reporting Standards (IFRS) and in the EU’s system of prudential regulation for banking regulators in South-East Europe. The workshop took place on April 18-19 2012 and was held at the CNB in Zagreb.


To the REPARIS program page

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Objectives

The workshop was attended by 40 participants from the CNB and bank regulators from the other REPARIS countries. The objectives of the workshop were for participants to:

  • gain a better understanding of current IFRS projects on accounting for financial instruments and of EU regulations on prudential requirements;
  • learn about the benefits of using FINREP and XBRL to analyze financial information;
  • review the changes stemming from the IAS 39 replacement project, IFRS 9 – financial instruments; and
  • explore how the review of financial statements prepared using IFRS can help them to carry out their supervisory duties.


Summary


The workshop was opened by Davor Holjevac, Vice-Governor of the CNB, and Pascal Frerejacque, Senior Operations Officer, Centre for Financial Reporting Reform. During his opening remarks Mr Holjevac commended the initiative of the World Bank and emphasized the importance for banking supervisors of keeping abreast of the latest international developments in financial reporting and regulation.

Erik van der Plaats of the European Commission presented the Commission's prosposals for a new capital requirements directive (CRD IV) to implement the Basel III rules in the EU. CRD IV increases the required level and quality of capital and also has provisions for the limits on liquidity ratios that are introduced in Basel III. The Commission hopes that CRD IV will be adopted by the EU before January 2013 but some elements of the package - in particular the extent to which national regulators will be able to impose additional capital requirements - are proving to be contentious.

Pascal Frerejacque, Anna Czarniecka and Shamim Diouman described the current state of play in the IASB's project to produce a new reporting standard for financial instruments (IFRS 9) to replace the existing standard (IAS 39). Progress in drawing up IFRS 9 has been slower than planned and only the first phase (classification and measurement) has so far been completed. The IASB is now proposing to delay the mandatory effective date of IFRS 9 to January 2015, but the new standard will only be applied in the EU after it has been endorsed by the EU and the Commission has indicated that the endorsement process will only be started once all elements of IFRS 9 are ready. During the second day of the workshop, Anna Czarniecka used examples and case studies to illustrate how accounting for financial instruments currently worked in practice (under IAS 39) and how this would change after IFRS 9 is adopted.

Marina Drvar from the CNB then shared how the CNB is collecting financial reporting data from the banks in Croatia. Her presentation described the approach that the CNB had taken in implementing the EU's FINREP system and how this system made it easier for the CNB to supervise the banking sector. Her presentation was complemented by a review by Michal Skopowski from the Business Reporting Advisory Group (BRAG) of how the flexibility of a taxonomy like XBRL could support bank supervisors in putting together financial and prudential reporting systems that help them carry out their supervision duties more effectively. The Central Bank of Moldova shared its experience of implementing FINREP using XBRL.

Shamim Diouman reviewed the disclosure requirements for financial instruments under IFRS 7 and discussed how banking supervisors could use this information. These disclosures can provide important indicators of the risks being borne by institutions. Mr Diouman also discussed how bank supervisors can apply prudential filters to banks' published accounts in order to derive measures of capital and other indicators used for regulatory purposes. Making the links between published accounts and regulatory measures clearer and more comparable between different jurisdictions is currently one of the priorities of the Basel Committee.

Heiner Klein from Austria's banking supervisor, the Financial Market Authority (FMA), described how the FMA carried out its supervisory activities, working closely with the central bank (the Austrian National Bank, OeNB). Mr Klein also presented several practical examples of how the FMA used detailed accounting information (prepared under IAS 39) in its activities.

The workshop was very well received and generated a high degree of participation from attendees. Participants raised several questions on aspects of the implementation of CRD IV and on applying current and future IFRS for financial instruments.


Links of interest


Links of interest





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