IFRS 9, Impact on Credit Risk Modelling

IFRS 9 'International Financial Reporting Standards' replaces IAS 39 as the recommended reporting standard for credit risk classification, measurement and reporting. Following the financial crisis, practitioners believed that the incorrect reporting of losses was partly to blame for the fall out. Under old rules losses were not recognised until they were realised - whereas under IFRS 9 any expected losses must be accounted for, and provisions made, as soon as the loss is expected.

There is some controversy around the topic as the method proposed under IFRS 9 is different to that proposed by Basel for the measurement and reporting of credit risks.