More scrutiny on lenders as new accounting rules kick in
By Patrick Alushula | April 13th 2018
Central Bank of Kenya (CBK) will monitor the performance of all bank loans on a monthly basis over the next five years to track how lenders cope with new accounting standards.
In a guidance note to banks on implementing International Financial Reporting Standard (IFRS) 9 that came into effect in January, CBK has amended templates for reporting of financial statements.
According to the guidance note, the regulator will track the level of provisioning by banks on all loans that were outstanding and performing by end of December last year as well as those issued this year.
“These revised return or template are to guide institutions in reporting compliance with both IFRS 9 and CBK guidance note during the five-year transition period,” said CBK banking supervision department.
Every month, for the next five years, banks will have to disclose to CBK the amount of performing loans at the beginning of the month as well as new loans issued during the month of review.
In addition, lenders will disclose performing loans that have migrated to non-performing status in the month of review and the amount of performing loans that have been paid in the same month.
Further, they will have to show the level of provisioning on new loans made in the month of review.
IFRS 9 stresses on strict provisioning of loans based on previous, current and future predicted the history of the borrower, making it forward-looking, unlike its predecessor that was only concerned with the historical background of the client.
At the same time, CBK has amended the template for quarterly and annual statements for banks as well as microfinance banks. The template for monthly return on capital adequacy ratios has also been changed.
Banks will now have to disclose in their financial statements the adjusted capital ratios that include the expected credit loss provisions added back to the capital to reflect the impact of IFRS 9.
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