Brendan, can you tell the Center for Financial Professionals about yourself and your experience in the accounting and IFRS 9 field?
I have been working in the UK banking industry for more than 12 years and in a technical accounting capacity for more than 24 years. I have worked in 3 countries and have experience 3 major mergers in my career so far (Deloitte & Touche, PW & C&L and Lloyds & HBOS).
I started my career in 1984 and have worked in various roles in the accounting profession in Australia, Hong Kong and the UK for 20 years, most recently in PwC’s Global ACS team in London where I looked after financial instruments and global IFRS publications. In 2004 I joined accounting policy at Lloyds Banking Group where worked on IFRS transition for the Group and developed a deep knowledge of financial services and of the bank’s financial instruments. In 2014, I joined Santander UK where I look after the Technical Accounting function. This includes being responsible, among my other technical accounting duties, for the Disclosures work stream of the IFRS 9 project for the past 9 months.
I represent Santander UK on the BBA Disclosure Working Group, the ISDA European Accounting Committee and the ICAEW Banking Committee. I was a member of EFRAG’s Financial Instruments Working Group between 2009 and 2012.
I am a member of both the ICAEW and Chartered Accountants Australia & New Zealand.
2. In your presentation you will touch upon the transferable knowledge from IAS 39 to IFRS 9. What aspects of IFRS 9 will be the same as IAS 39?
Banks will choose to remain with IAS 39 hedge accounting for the time being while the macro hedging proposals are being finalised by the IASB. Derecognition rules are largely the same between IAS 39 and IFRS 9. Classification & measurement and impairment are, however, totally different.
3. What are the risks associated with disclosure before the full impacts of IFRS 9 are known?
Probably very little other than a lack of a clear understanding of the financial impact. In the absence of publishing financial impacts, which will only happen in H2 2017, disclosures only give the reader a sense of a bank’s implementation efforts and where they are in that process. Until impacts are known, investors and others will remain ‘curious if not suspicious’. However, there is evidence from the EBA’s April 2016 survey that impairment provisions are expected to increase in the order of 20-30% above IAS 39 levels so there is some information out there to provide the very broadest of potential impacts.
4. What are your main concerns post 2018 IFRS 9 implementation?
I think there is going to be a period of reflecting and readjusting as peers compare and contrast one another and “best in class” disclosures and practices emerge. I sense that investors do not yet have a deep understanding of the changes nor the drivers behind them so a big part of 2018 is going to be getting investors up the curve in terms