A lack of collaboration and skills is limiting the ability to meet IFRS 9 requirements, revealed the IFRS 9 Confidence Report from Jaywing.
Ben O’Brien, managing director at Jaywing, said: “While some lenders are feeling confident about their progress towards IFRS 9, others say they are struggling.”
The deadlines to meet IFRS 9 requirements begin in January 2018. It’s recommended that models are developed, validated, implemented and tested by the end of 2016. IFRS 9, born out of the financial crisis, will replace the current IAS 39 regime and apply to all lending organisations.
The report analysed responses from 100 key decision makers from financial services organisations across the UK during August and September 2016.
Banks are more prepared for IFRS 9 as 49% are already in the implementation and testing phase. Only a third of consumer credit companies and 29% of auto finance businesses are testing at this time, with just 11 weeks to go before the year end. Building societies were found to be the least prepared with just 27% in the testing phase. Half, 49% of lenders believe an integrated approach will be key to helping them meet requirements.
Additionally, 56% of organisations believe the biggest challenge to building IFRS 9 models is the availability of analytical expertise. This was closely followed by the availability of quality data and infrastructure 55%, and timescales associated with developing a compliant solution, 50%.
Four in five organisations have recognised a need for outside help, either through outsourced consultancy or external software, with 20% planning to handle it alone.
Over a third of economic teams, 36%, expect their organisation to complete their parallel runs before the end of the year, however the majority of compliance, 33%, and finance teams, 43%, don’t think their organisation’s will be ready to parallel run until Q2 2017, with IT departments, 31%, even later at Q3 2017.
Organisations are encouraged by Jaywing to achieve a best practice approach to IFRS 9 by focusing on key areas such as unified internal teams, data requirements and management, appropriate IFRS 9 model design, implementing an early testing phase, and clear governance processes.
Jaywing’s has consulted with eleven lenders and launched the software solution Horizon, which enables lenders to quickly and cost-effectively produce IFRS 9 provisions, while supporting stress testing and ICAAP processes.
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