Market Consistency and WMC [12]

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Bullet points include: IFRS 9 is a response to perceived weaknesses in earlier IAS that became evident during the 2007-09 Credit Crisis. Previously, instruments would be held at amortised cost until an impairment trigger occurred, which tended to be only when an actual impairment trigger had taken place (e.g. default or extended past due). So perceived to be too backward-looking. Evidence suggests banks delayed impairing assets even when it had become clear that they were unlikely to be repaid in full. Inflated their apparent capital position. G20 leaders and Financial Stability Board asked accounting standards setters to develop something that was more forward-looking. Under IFRS 9, if credit quality has deteriorated materially then banks are required to allow for lifetime future expected credit losses. Requires enhanced economic modelling

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