Regulatory treatment of accounting provisions - interim approach and transitional arrangements

The Basel Committee on Banking Supervision today released a consultative document and a discussion paper on the policy considerations related to the regulatory treatment of accounting provisions under the Basel III regulatory capital framework.

The International Accounting Standards Board (IASB) and the US Financial Accounting Standards Board (FASB) have adopted provisioning standards that require use of expected credit loss (ECL) models rather than incurred loss models.

The new accounting standards modify provisioning standards to incorporate forward-looking assessments in the estimation of credit losses. The consultative document released today sets out the Committee's proposal to retain, for an interim period, the current regulatory treatment of provisions under the standardised and the internal ratings-based approaches. In addition, the Committee is seeking comments on whether any transitional arrangement is warranted to allow banks time to adjust to the new ECL accounting standards.

In addition to the consultative document, the Committee has issued a discussion paper on the policy options for the long-term regulatory treatment of provisions under the new ECL standards.

The Committee welcomes comments from the public on all aspects of the proposals described in these documents. Comments on the proposals should be uploaded here by 13 January 2017. All comments will be published on the Bank for International Settlements website unless a respondent specifically requests confidential treatment.