The expected impact of IFRS 9 on the Greek banking system’s financial performance: theoretical considerations and insights

Abstract

The purpose of this study is twofold: to provide a general overview of the newly established accounting standard - IFRS 9 and highlight its expected impact on the financial condition of the European banking system, placing the focus on the Greek banking sector. The research methodology implemented is a critical overview of IFRS 9, based on officially published papers by the regulatory authorities as well as recent trusted professional papers and guidance reports, due to the fact that the implementation of IFRS 9 is very recent and banking institutions are gradually adopting it. An analytical description of the new requirements and banks’ readjustments is also provided and the expected impact on the European banking system is analysed, through the lens of the Greek systemic banks, as slightly captured, due to the small period of implementation. The findings showed that the expected alterations due to the implementation of IFRS 9 will cause major effects to the European banking system, at all levels. The authors highlight that banks must proceed to fundamental changes into their existing business models to respond to the IFRS 9 requirements from the view of the effects the latter will have on their financial situation. Regarding the Greek banking system, the study highlights that IFRS 9 implementation is expected to raise the coverage of NPEs (a positive impact), while additional provisions will have a negative regulatory capital effect. This paper offers the first, to the best of the authors’ knowledge, study focusing on the expected impact the implementation of IFRS 9 will have on the Greek banking system. It also provides a general overview of IFRS 9, driven by the relative shortage of relevant research, while offering useful insights which contribute to a deeper understanding of the transition and transmission effect on the banking system’s functionality.