The landscape of financial reporting in Bangladesh is changing with the adoption of IFRS 9. This standard introduces the Expected Credit Loss (ECL) model, replacing the old incurred loss approach. Scheduled banks are now required to prepare for a forward-looking provisioning system, in line with Bangladesh Bank regulations and global accounting standards.
Below are the most frequently asked questions by banks as they navigate this transition.
General Questions
What is IFRS 9?
IFRS 9 is the accounting standard for financial instruments, replacing IAS 39, introducing the Expected Credit Loss (ECL) model.
Who must apply IFRS 9 in Bangladesh?
All scheduled banks reporting under IFRS are required to adopt IFRS 9.
When must Bangladeshi banks implement IFRS 9?
Full implementation with ECL-based provisioning must be completed by December 2027.
Expected Credit Loss (ECL)
What is the Expected Credit Loss (ECL) model?
ECL estimates potential loan losses based on historical data, current conditions, and forward-looking forecasts.
What are the three stages of impairment under IFRS 9?
Stage 1 – 12-month ECL; Stage 2 – Lifetime ECL for significant credit risk increase; Stage 3 – Lifetime ECL for credit-impaired loans.
How is “significant increase in credit risk” determined?
Banks assess changes in credit ratings, days past due, financial deterioration, or loan restructuring.
Do banks need forward-looking macroeconomic scenarios?
Yes, GDP growth, inflation, interest rates, and other forecasts must be incorporated into ECL.
How often must ECL models be validated?
Banks should validate ECL models at least annually or whenever significant changes occur.
Impact on Banks
How does IFRS 9 affect bank profitability?
Initial provisions may increase, reducing profits, but earnings become more stable over time.
What is the “Higher Of” Rule?
During transition, banks maintain provisions equal to the higher of regulatory requirements or IFRS 9 ECL.
Does IFRS 9 apply to off-balance sheet exposures?
Yes, it covers loan commitments, guarantees, and other off-balance sheet items.
What financial assets are most impacted by IFRS 9?
Loans, advances, trade finance, interbank placements, debt securities, and off-balance sheet exposures.
Will IFRS 9 replace Bangladesh Bank’s current provisioning rules immediately?
No, there is a parallel run period; full replacement is expected by 2027.
What are the main challenges for Bangladeshi banks?
Limited historical data, forecasting difficulties, system readiness, and potential CAR impacts.
How does IFRS 9 improve financial reporting?
It enhances transparency, early recognition of losses, and more stable risk management for banks.
Conclusion
The adoption of IFRS 9 is a major step forward for Bangladeshi banks. By transitioning to the ECL model, banks will improve risk prediction, financial transparency, and compliance with international standards.
Muzammal Rahim Khan is the CEO and Co-Founder of FineIT, bringing over 15 years of expertise in software development, implementation, and technical consulting across global markets including the U.S., U.K., Europe, Africa, and Asia. He has led the design and delivery of enterprise-grade solutions that modernize compliance, risk management, and financial reporting for banks and financial institutions. Under his leadership, FineIT has built flagship platforms such as Estimator9 (IFRS 9) and ContractHive (IFRS 16), empowering clients with automation, accuracy, and audit-ready confidence. Muzammal combines deep technical knowledge with strategic vision, driving innovation that bridges regulatory requirements with practical, scalable technology. His focus remains on building resilient, future-ready solutions that strengthen trust and efficiency in financial services.