EU banks face 18% provision spike under new rules

European banks will need to increase provisions by 18 per cent on average to meet new rules on accounting for potential loan losses, according to the European Banking Authority. The accounting standards known as IFRS 9, which are set to apply from 2018, will also take a toll on lenders’ balance sheets, shaving an average of 59 basis points from their top-quality capital ratios, according to the EBA study published on Thursday. The estimates were based on a survey of about 50 banks of all sizes across the 28-nation bloc, with most categorized as being of systemic importance either globally or domestically.