18th August 2016
Canadian banks have received one more year to implement global reforms introduced by the Basel Committee on Banking Supervision in the wake of the 2007-2008 worldwide economic meltdown. The changes would attempt to improve risk disclosures and the time would allow lenders to devote time and resources to adopting new accounting standards before adopting the changes.
The Basel Committee on Banking Supervision (BCBS) was founded in 1975 and promotes regular cooperation on banking supervisory matters by providing a forum for banks across the globe. Its mission is ‘to enhance understanding of key supervisory issues and improve the quality of banking supervision worldwide.’ The committee members are banking experts and professionals from across the world. They come from countries such as Argentina, Australia, Brazil, Canada, France, Germany, Hong Kong, India, Italy, Japan, Mexico, Switzerland, the United Kingdom, and the United States, to name a few.
Canada’s financial supervisory body, the Office of the Superintendent of Financial Institutions stated that the back would have until October 2018 to make the changes to strengthen disclosure agreements. The additional time will give the country’s largest lenders more breathing room to focus on installing ‘high-quality’ global accounting standards.
Originally, the Canadian banks were supposed to be some of the first from any nation to adopt the latest version of the International Financial Reporting Standards (IFRS) in November 2017 with the vast majority of other countries adopting the standards in 2018. The supervising body said on its website that a ‘significant level of effort’ was required to implement the new international standards. The banking watchdog seems content to postpone the changes while the banks bring the accounting side of things up to snuff.
The big reason for the extension, according to experts, is because bringing in the new international accounting standards has been considerably more work than most expected. Banks have been buried in the implementation of IFRS and so the extra allotted time will give them some wiggle-room when it comes to the Basel disclosure requirements, experts said.
The new disclosure requirements would usher in several new and improved practices and guidelines. For example, the new risk disclosure guidelines would require banks to provide notice of expected credit losses earlier than before. Accounting firms across in Ottawa, Toronto, and across Canada realize the substantial impact this rule would have on the way financial institutions account for losses on loan portfolios.
As of now the Office of the Superintendent of Financial Institutions’ decision to extend the timeline to adopt the new reforms won’t affect the requirements on Canadian banks to hold certain levels of capital and liquidity.
Experts in tax law believe the Basel disclosure requirements and new accounting standards will each require banks to be more assiduous and thorough when providing details about the existence and extent of any risks coming from financial instruments.
As always Accountancy Insurance is here to not only provide its clients with the best in tax audit insurance, but also updates on current events occurring across the world in real time. If your accountancy or auditing firm is in need of tax audit insurance, contact Accountancy Insurance.