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ESMA Publishes Study on Expected Credit Loss Disclosures Of Banks

The European Securities and Markets Authority (ESMA), the EU’s securities markets regulator, has published a study on the application of IFRS 7 Financial Instruments: Disclosures and IFRS 9 Financial Instruments (impairment requirements) regarding banks’ expected credit losses (ECL).

The study highlights opportunities for improvement in the level of compliance, comparability and transparency in the application of the IFRS requirements.

Preparers of financial reports, auditors and Audit Committees are expected to consider the findings of the study when preparing and auditing the financial statements.

ESMA’s recommendations include:


  • general aspects of the ECL-disclosures
  • assessment of significant increase in credit risk
  • forward-looking information
  • explanation of changes in loss allowances
  • transparency of disclosures on credit risk exposures, and
  • ECL sensitivity disclosures.


The study gives an overview of the level of banks’ compliance with the existing ECL-related requirements of IFRS 7 and IFRS 9, with the primary focus on relevance and comparability of disclosures. The overview builds on a desktop review of the 2020 financial statements of a sample of 44 European banks across 21 countries.

IAASA participated in the research for the study. Irish banks were included in the sample of 44 banks.

ESMA intends to leverage on the results of this study in its response to the International Accounting Standards Board’s request for information related to the Post-implementation Review of impairment requirements of IFRS 9, which is expected in 2022.

The study is available here.