The Challenges of Transition to IFRS in Terms of Prudential Supervision of Credit Institutions

Author:Veronica RĂDUCĂNESCU, Mirela DIMA, Ph.D.

JEL:M40, M41, M48

DOI:

Keywords:credit institutions, National Bank of Romania, European directives, IFRS, prudential filters, credit loss provisioning, expected loss model, incurred loss model

Abstract:
Differences between the objectives of IFRS framework and those of prudential regulations used in the supervision of credit institutions require, due to the transition to IFRS from 1 January 2012, in terms of prudential reporting and regulations, a set of adjustments to be operated. \r\nThese are necessary to ensure that the change in the basis of accounting will not distort the way of computing, the content and the meaning of the prudential indicators used in the supervision of credit institutions.\r\nThe article presents the analysis carried out at the level of the National Bank of Romania in order to implement the prudential filters necessary due to differences between the IFRS accounting method and the current accounting regulatory framework at national level. \r\nAnalyses and results (embodied in the filters to be covered by the regulations to be issued) are focussed on three domains, which are: determination of the level of credit risk provisions, the determination of own funds and solvency ratio setting.

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