Dhaka: Experts at a webinar today emphasized the need for proper implementation of the International Financial Reporting Standards (IFRS) 9, highlighting its importance for robust modelling, reliable data, and cohesive coordination between risk and finance functions. They noted that building technological resilience, reinforcing governance, and investing in data infrastructure are crucial steps for banks to ensure compliance and enhance their overall financial and operational sustainability.
According to Bangladesh Sangbad Sangstha, the Institute of Chartered Accountants of Bangladesh (ICAB) organized the webinar titled ‘Implementing IFRS 9: Global Insights and Bangladesh Perspectives.’ Industry professionals discussed significant challenges in implementing the standard. Muhammad Mehedi Hasan, Vice President-ICAB and Partner at Rahman Rahman Huq, Chartered Accountants, presided over the session as chairman.
A major challenge identified was the availability of empirical data. While default data is often accessible, recovery data remains sparse, hindering the discriminatory power of models and delaying the IFRS 9 implementation process. Incorporating forward-looking information is another hurdle, as many banks lack sufficient historical data to differentiate scenarios or make reliable probability-weighted estimates. Experts pointed out that the weak correlation between macroeconomic factors and default rates further diminishes the reliability of predictive modelling.
Dr. Md. Kabir Ahmed, Deputy Governor of Bangladesh Bank, highlighted that for an emerging economy like Bangladesh, with its dynamic and expanding financial sector, implementing IFRS 9 represents a paradigm shift. It equips financial institutions to be better prepared for potential future losses and more resilient to economic shocks.
In his address, N K A Mobin FCA, President of ICAB, asserted that adopting and implementing IFRSs are not merely technical compliance exercises but are vital for enhancing transparency, strengthening financial stability, and fostering international investor confidence. He emphasized that ICAB, as the core professional accountancy body in Bangladesh, considers it a sovereign duty to lead the discourse and facilitate a smooth transition to these global benchmarks.
Mobin also stressed that effective implementation of IFRS 9 requires joint efforts from key regulators, including Bangladesh Bank, the Bangladesh Securities and Exchange Commission (BSEC), and the Financial Reporting Council (FRC). He highlighted the crucial role of preparers, such as banking institutions and corporations, whose financial statements are directly impacted by this standard.
Rajith Perera, Partner at Ernst and Young and Risk Management Leader of the Institute of Chartered Accountants of Sri Lanka, delivered the keynote presentation, discussing practical challenges encountered during the IFRS 9 implementation phase. He observed that many banks lacked strong models for estimating Expected Credit Losses (ECL), and validation exercises revealed that existing models were often insufficiently robust to produce accurate Probability of Default (PD) and Loss Given Default (LGD) estimates.
Sk. Ashik Iqbal FCA, Partner at Nurul Faruk Hasan and Co., Chartered Accountants, noted that for many banks, the shift from the old incurred loss model to the expected credit loss (ECL) framework is not merely a compliance issue but a survival test. He pointed out that, unlike large international institutions with decades of credit data, most Bangladeshi banks are implementing IFRS 9 with patchy information systems, limited modelling expertise, and intense regulatory oversight.
Iqbal stated that IFRS 9 presents an opportunity to restore trust, improve provisioning discipline, and enforce better governance. However, weak models, inconsistent default definitions, or poorly designed scenarios could add confusion instead of clarity, he cautioned.
To address these challenges, industry experts recommended a multi-dimensional approach, including investment in robust technology platforms to support automation, data integration, and real-time reporting. They further advised banks to establish strong governance frameworks and oversight mechanisms, revisit portfolio segmentation strategies to align better with risk profiles and regulatory requirements, and strengthen data infrastructure to handle the increased granularity and frequency of reporting.