Central Bank issues new regulations to implement IFRS9

The Central Bank (BDL) has instructed local banks to abide by additional regulations in preparation for the implementation of the International Financial Reporting Standard 9 (IFRS 9).

IFRS 9, which is promulgated by the International Accounting Standards Board (IASB), includes accounting standards pertaining to financial instruments. When it becomes effective in January 2018, IFRS 9 will replace an earlier international norm.

In preparation of this new standard, BDL informed banks through intermediate circular 428 that they must create additional provisions in the Lebanese currency that will be part of Tier 2 capital. Tier 2 capital is supplementary capital in line with the Basel Accords. It usually includes such items as general provisions, revaluation reserves, and hybrid instruments.

The banks are also required to abide by the conditions of ‘derecognition’ when they are engaged in the sale or exchange of financial instruments, according to intermediate circular 429. ‘Derecognition’ entails the removal of specific financial assets from the banks’ total balance sheet.

Sales of financial instruments by banks should be at market value and follow specified terms and conditions.