Simone, can you please tell the Center for Financial Professionals about yourself and your experience in the IFRS 9 field?
I have been working in the banking sector since almost 20 years, dealing with several challenging project through different department, including operations, M&A, sales management, planning and Risk Management. Since 2015 I am in charge of coordinating IFRS9 program for the Impairment work stream at group level, therefore coordinating the effort across the different department and the main group legal entities impacted by this change in regulation.
Why is it essential that financial institutions adopt the parallel phase of implementation?
A parallel run phase has been also suggested by EBA upon their first IFRS9 Impact Assessment exercise among several main European banks.
Independent from the project status, a parallel run can represent an important opportunity for testing and fine tuning both models and processes under implementation, for supporting a business planning more consistent with the new logic and to give better hints to the stakeholders on the actual impact of such changes.
In regards to the approaches which financial institutions should adopt: front line integration, separate projects or phased approach. What are the main differences between the three approaches?
The difference lays on the degree of separation between the regular current LLP calculation process and the adjusted LLP calculation process under the new credit models and rules, and on the degree of changes an institution wants to bring in in one or more steps.
The level of “phase in” or “go live” approach is strictly connected to both the degree of implementation/ fine tuning of the new models and processes in the systems and to the bank’s strategy. Each of these approaches include Pros and Cons, to be carefully evaluated by each institution.
Do you think that the 2018 implementation will have an impact on financial institutions and will they face challenges throughout the year, post implementation?
IFRS9 will drive for sure a meaningful impact on the banking sector in 2018. even if it is expected that all banks will be up and running with the new models, rules and processes by January the 1st 2018, the whole year will probably represent a final “live test” for the new rules. New time series will start to be built on the new logic, helpful for back testing and for future adjustments on models and processes.