IFRS 9

The adoption of IFRS 9 Financial Instruments in Kenya, mandated by the Central Bank of Kenya (CBK), introduced a fundamental shift in how financial institutions (FIs)—especially commercial banks and smaller entities like SACCOs—calculate loan loss provisions. The move from the backward-looking Incurred Credit Loss (ICL) model (under IAS 39) to a forward-looking Expected Credit Loss […]

The transition from the Incurred Credit Loss (ICL) model of IAS 39 to the Expected Credit Loss (ECL) model of IFRS 9 has fundamentally reshaped credit risk management and Non-Performing Loan (NPL) resolution strategies for commercial banks in Kenya. Implemented since January 2018, IFRS 9 mandates a forward-looking approach, requiring banks to recognize potential credit […]

The International Financial Reporting Standard 9 (IFRS 9) marked a pivotal change in global accounting, moving financial institutions from the reactive ‘Incurred Loss’ (IAS 39) model to a proactive ‘Expected Credit Loss’ (ECL) model. For commercial banks, microfinance banks, and SACCOs in Kenya, building a robust IFRS 9 roadmap has been critical for strengthening financial […]

The implementation of International Financial Reporting Standard 9 (IFRS 9) has fundamentally changed how financial institutions in Kenya—including Microfinance Institutions (MFIs) and Savings and Credit Co-operative Societies (SACCOs)—account for loan losses. The shift from the backward-looking Incurred Credit Loss (ICL) model under IAS 39 to the forward-looking Expected Credit Loss (ECL) model under IFRS 9 […]

Exposure at Default (EAD) is a crucial risk parameter used by financial institutions, particularly banks, to estimate the potential loss they would face if a borrower (counterparty) defaults on a debt obligation. It represents the gross exposure of a bank to a facility or counterparty at the time the default occurs. EAD is one of […]

The global financial crisis of 2007-2009 exposed a critical flaw in the banking world’s accounting rules: the Incurred Credit Loss (ICL) model, which only required banks to set aside provisions after a loan loss event had occurred. This was widely criticized as “too little, too late,” contributing to the severity of the crisis. In response, […]

The International Financial Reporting Standard 9 (IFRS 9) on Financial Instruments represents one of the most significant changes to accounting practices in the Kenyan financial sector in recent memory. Mandated for global adoption on January 1, 2018, this standard fundamentally altered how financial institutions—primarily commercial banks, microfinance banks, and Savings and Credit Co-operative Societies (SACCOs)—classify, […]

In the world of finance, particularly within credit risk management, “Loss Given Default” (LGD) is a crucial metric. It represents the proportion of an exposure that a bank or financial institution expects to lose if a borrower defaults. In simpler terms, it’s the percentage of a loan that won’t be recovered after a default event. […]

In the world of finance, risk is an ever-present factor. Whether you’re a bank lending money, an investor buying bonds, or a business extending credit, assessing the likelihood that a borrower will fail to meet their financial obligations is paramount. This assessment is captured by a crucial metric known as the Probability of Default (PD). […]

The financial landscape globally has been significantly reshaped by the introduction of IFRS 9 Financial Instruments, particularly its forward-looking approach to impairment through Expected Credit Loss (ECL) modeling. For listed banks in Bangladesh, the adoption of IFRS 9 has presented both opportunities and challenges, requiring substantial changes in risk management, data infrastructure, and accounting practices. […]