On October, 14th 2021 the Bank of Italy published No. 644 of the series “Questioni di Economia e Finanza” entitled “The implementation of the IFRS 9 accounting standard in Italy by small banks and financial intermediaries” by Andrea Canton, Tommaso Loizzo and Federico Schimperna.
The paper provides the results of an analysis carried out on a sample of small Italian banks and financial intermediaries regarding the application of the IFRS 9 accounting standard, also following the Covid-19 pandemic. The objective of the study is to identify possible methodological choices made by financial intermediaries that are inconsistent with the standard and have potential implications for the ratios relevant for prudential supervision purposes.
The analysis pointed out a generally adequate implementation of the standard. Weaknesses emerged, in particular relating to compliance with the caps on sales in the portfolio at amortized cost and to the impairment of financial instruments (improper allocation of financial instruments to risk stages and inadequate estimation of expected losses). The Covid-19 pandemic has not led to changes in the methodological choices adopted for the application of the standard.