Thematic inspection: Recognition of credit losses according to IFRS 9
Published: 5 November 2020
In 2019, Finanstilsynet conducted a thematic inspection of the implementation of the requirements regarding credit losses in IFRS 9 Financial instruments in DNB Bank, SpareBank 1 SMN, Sparebanken Vest, Sparebanken Sør, Sparebanken Øst, Sandnes Sparebank, Helgeland Sparebank, Bank Norwegian and Komplett Bank.
The inspection aimed to review how the banks employ the new credit loss requirements that came into force on 1 January 2018. As part of the thematic inspection, the banks' models and financial statements in selected areas described in IFRS 9 were reviewed.
The summary report provides a description of individual topics addressed during the thematic inspection. In the reports to the individual banks, Finanstilsynet points to aspects that in its view should be improved or amended. In this connection, Finanstilsynet has made no further assessment of loss allowances for individual credit exposures, nor has it said anything about the individual bank's general impairment level. These issues are followed up at a risk-based level at on-site inspections and possibly through financial reporting supervision.
Subsequent to the on-site inspections, Norway, like other countries, has been hit by an economic downturn as a consequence of Covid-19. The thematic inspection is based on the regulatory framework for banks at the time of the inspection and any announced changes, and does not factor in how the significant deterioration of the Norwegian and international economy has been reflected in the banks’ loss allowances in 2020. However, the summary report includes some general reflections related to the assessment of expected credit losses in 2020 and associated disclosures.