And banks also need to be given adequate incentives, in particular in relation to accounting for impaired assets. From 1 January 2018 onwards, a new accounting standard for the classification and measurement of financial instruments, known as IFRS 911, becomes mandatory in EU.
At the request of the European Parliament, the ESRB has recently published a report on the financial stability implications of IFRS 9,12 which concludes that it is a major improvement, particularly regarding accounting for NPLs. The most important change introduced by IFRS 9 is the shift from an incurred loss approach to an expected credit loss approach for measuring impairment allowances.