- Real effects of the IFRS 9 adoption in banking
- Arfé, Antonio <1973>
Subject
- SECS-P/07 Economia aziendale
Description
- The recent adoption of IFRS 9 is a highly disruptive accounting reform, with significant impacts on how and when negative news (i.e., negative adjustments to reported earnings) are recognized on the financial statements. Using a unique dataset of two major banks operating in one European country we provide evidence of a tightening of the corporate loans pricing after the IFRS 9 adoption. Furthermore, by focusing on the post reform period, we show that the tightening is driven by the new staging classification. Higher risk premiums are associated to clients with previous underperforming exposures (stage 2) and higher probability of default. We also observe that the staging classification is not affecting climate risk premiums. Our results highlight that the lenders, as expected by the regulation, change their risk appetite by charging higher spreads to discourage loan origination for clients that became too risky and expensive under the new standard.
- We investigate the nexus between the interest rates charged to bank borrowers and loan-to-value (LTV). Using a unique dataset on mortgage applications from a major European bank (2017-2020), we test whether reporting entities change resource allocation in response to a new accounting rule (real effect hypothesis) by exploiting the mandatory IFRS 9 adoption in 2018 as a laboratory setup. We first find evidence of a tightening of loan-to-value in retail banking, suggesting that its introduction increases the LTV-related costs compared to its predecessor (IAS 39). Second, we demonstrate that the staging classification drives the tightening in LTV. For bank borrowers with previous underperforming exposures, increasing LTVs might become proportionally more expensive. Finally, we show that underperforming borrowers are exposed to further LTV reductions when they apply for mortgages with higher maturity and higher climate-related risks. Our findings provide important implications since the extensive staging downgrades create the conditions for credit crunch phenomena.
Date
- 2023-06-19
Type
- Doctoral Thesis
- PeerReviewed
Format
- application/pdf
Identifier
urn:nbn:it:unibo-29253
Arfé, Antonio (2023) Real effects of the IFRS 9 adoption in banking, [Dissertation thesis], Alma Mater Studiorum Università di Bologna. Dottorato di ricerca in Management