05 March 2020

CBUAE, ADGM & DIFC issues a joint guidance for banks and finance companies on the application of IFRS9 during COVID-19 pandemic

Description

  • The CBUAE has already taken action to provide banks and finance companies a number of relief measures available under the Targeted Economic Support Scheme (TESS), given the economic disruption caused by COVID-19, effective from 15 March 2020.
  • The Authorities are supporting both federal and local initiatives aimed at providing sustainable solutions to support borrowers who will be utilising government- sponsored debt relief programs at this time.
  • In addition to these measures the CBUAE, FSRA of ADGM and DFSA believe that the flexibility embedded in the IFRS 9 framework should be employed to cope with the current crisis by banks and finance companies that are part of the TESS.

Impact

Authorities will be publishing specific guidance with respect to the calculation of Expected Credit Loss (“ECL”) provisioning under IFRS 9.

The overriding objective of the guidance is to ensure that financial reports are based on up to date estimations of the risks faced by banks and finance companies while recognising the magnitude of support measures implemented by the Authorities, and acknowledging that the decision-making process related to IFRS 9 application will need to be adjusted in the current environment.