Second, we should move from the current “incurred loss impairment model” to an “expected loss impairment model”. In this context, the ECB welcomes the IASB proposal for a new impairment methodology that is based on the concept of “expected losses”, which would contribute to mitigating pro-cyclicality.
Given that the work in this field is on-going, the ECB urges the IASB to continue working together with the Basel Committee on Banking Supervision with a view to developing an operational solution to a more forward-looking provisioning approach.