PRA directs against rigid application of IFRS 9 and loan book write-downs

By Neasa MacErlean

The PRA has set out urgent new guidance for banks that is aimed at stopping them from being overly cautious in their accounting, commercial and regulatory treatment of borrowers who default on loan terms. The accounting guidance comes just as banks with March and April year-ends make crucial forward-looking decisions on their ‘expected credit loss’ estimates over the extent to which loan books need to be written down.