Saudi banks not impacted by IFRS9 application

Saudi banks have not been impacted by application of IFRS9, Talaat Hafez, secretary-general of the Media and Banking Awareness Committee of Saudi Banks, told Argaam in an exclusive Sunday.

The local banks are adopting a prudent accounting, measurement and provisioning policy, while taking into account building up the reserves and hedge funds required for various financial instruments, subject to IFRS9, including loans.

“The sector showed solid financial safety indicators, as the capital adequacy ratio stood at 20.4 percent, with a marginal ratio of non-performing loans to total loans at 1.6 percent. The coverage ratio for credit provisions exceeded 150 percent,” Hafez said.

The IFRS9 set new criteria for classifying the financial assets and liabilities of entities, using the probability of default even if it hits 0.5 percent or 1.0 percent. This will reflect on the classification of such financial instruments, disclosure method and the provisioning required based on the fair value.

In July 2014, the International Accounting Standards Board (IASB) issued the new version of IFRS 9, replacing the IAS 39, following the 2008 global financial crisis.

The new standard enhances hedging levels and offers new requirements for classification, measurement, disclosure, and provisioning.

The IFRS9 came into effect on January 1, 2018, he added.