Banks seeking to extend SLFRS 9 relief
About six months ago the understanding was that the banks cannot support the nation building, give the moratorium and get their balance sheets hammered. That is why it was decided that some sort of relief would be given in adopting SLFRS 9.
Commercial banks are urging an extension to the time period on the relief given to them in the last quarter in reporting their financials.
During March to September, a relief was given to them in some of the provisioning and how they account for financial instruments in Sri Lanka Financial Reporting Standard – 9 ( SLFRS – 9). The financial reporting considerations areas in the backdrop of COVID- 19 included Financial Instrument, Fair value measurement of Financial Assets, Impairment of Assets, Going Concern, Events after the Reporting Period, Recognition of Deferred Taxes and Lease Modifications.
This expired on September 30. As an example, on account of COVID-19, the moratorium was recorded against the interest income as per the modification method given in the SLFRS 9.
The banks, the Central Bank and the Institute of Chartered Accountants were to have a meeting last week to discuss extending this further, but it was put off due to the current COVID-19 situation, a senior banker told the Business Times. “About six months ago the understanding was that the banks cannot support the nation building, give the moratorium and get their balance sheets hammered. That is why it was decided that some sort of relief would be given in adopting SLFRS 9. With the recent events, there should be flexibility in applying the standard into our accounting statements," he said. SLFRS 9 concessions also allow banks to avoid treating loan leniency measures such as a repayment extension as if it were a significant increase in credit risk.
Another CEO of a large bank said that structural changes are needed in order to revive the banking sector. He said that many countries are granting banks temporary relief from the full impact of accounting and regulatory rules in the coronavirus pandemic. “With the situation exacerbating, there’s a difficulty to differentiate which information and facts and circumstances need to be incorporated into the measurements as at the end of the reporting period and which shall result in potential subsequent event disclosures supported by several changes in estimates, assumptions and other analyses in a more descriptive manner.”