Abstract
This research investigates how the adoption, in 2018, of the IFRS 9 standard has affected banks’ loan loss provision and allowance disclosures. This constitutes one of the first post-implementation tests of this new standard. Overall, we found that the introduction of IFRS 9 has translated into a moderate loss for banks on the day of the adoption, with significant differences between rich and poor countries. Following the adoption of IFRS 9, sovereign credit ratings have gained greater influence on loan loss allowances, while the influence of impaired loans has been eroded; we posit that this is largely due to the recourse to expected credit loss models – which give considerable weight to credit ratings – to measure provisions. Our results suggest that the heterogeneity of provisioning practices has increased with the switch to IFRS 9, which has altered the comparability of provisions across banks. The association of LLAs with short term loan losses remains close, which contradicts their forward-looking character, unless we deny the effect of economic cycles.