EBF advisor: Denisa Mularova

Publication date: 12 January 2017

Key points:

• The regulatory framework must ensure that the same potential losses are not covered both by capital and provisions.


• Discussions on the treatment of excess provisioning should be accelerated. The revision of the treatment of accounting provisions cannot take place in blocks without considering all relevant major aspects altogether.


• Provisions in excess of 12 months should be considered for capital purposes regardless of the capital method used to calculate capital.

• Excesses and shortfalls in provisions should be treated symmetrically both under the standardized approach (STA) and internal ratings-based (IRB) approaches. If this symmetrical treatment is accepted, then the regulatory EL could be useful in providing a basis for such a symmetrical treatment for STA. However it needs further considerations and recalibrations to eliminate overlaps.

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