Authors: Despoina Ntaikou, Georgios Vousinas

Title: Exploring the impact of the International Financial Reporting Standards 9 on the banking system’s lending channel: Evidence from major European banks

Abstract

According to the official guidelines of the Basel Committee on Banking Supervision (BCBS) for the financial institutions’ (FIs) obligation to comply with stricter supervisory requirements and processes and to create a more stable financial system, supervisors’ call for stricter rules has been moving towards implementation state, especially for credit risk provisioning via the IFRS 9 (International Financial Reporting Standards 9) mechanism. Provided that the impact of IFRS 9 on FIs’ position is expected to be significant, regarding their key financial ratios such as financial position and Expected Credit Losses (ECL), stock provisions are expected to increase. An empirical analysis is conducted, by using panel data regressions as well as the Generalized Method of Moments (GMM) for robustness tests, on the financial ratios for a selected sample of major European Banks, during the IFRS 9 implementation period in comparison to the pre-adoption state. The aim of this paper is to shed light on the correlation between the bank lending channel and the implications of the IFRS 9 guidelines. The key findings highlight the effect of the IFRS 9 adoption on the loans net provided to the real economy and contribute to a deeper understanding of the new regulatory regime.