Modelling interconnection between provision under IFRS9 and countercyclical capital buffer
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Abstract
Impairment recognition according to the International Financial and Reporting
Standards changed significantly in 2018 with the introduction of IFRS 9. In this paper I am
modelling the interconnection between provision under the new IFRS 9 standard and
countercyclical capital buffer of prudential regulation. The recently introduced IFRS 9
impairment model is closely related to the economic cycle. I am modelling the effect of
macro environment to the allowance and going to compare it with regulatory mechanism of
countercyclical capital buffer.