The Impact of Complex Financial Instruments on Banks’ Vulnerability: Empirical Evidence on SSM Banks

Perez, Tommaso; Potente, Francesco; Carboni, Andrea; Iorio, Alberto Di; Raponi, Jacopo

doi:10.2139/ssrn.3896326

Cited by 1 publication

(1 citation statement)

References 0 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…In research about financial stability, Tommaso et al. (2021) conduct a panel regression for Single Supervisory Mechanism (SSM) banks from 2014 to 2019 with IFRS 9 as a dummy variable. While their random‐effects model between estimates concludes a negative correlation between the z‐score and IFRS 9, the fixed effects model detects an increase in z‐score with a p ‐value of less than 0.1.…”

Section: Literature Reviewmentioning

confidence: 99%

Long and Short‐term Investments by European Banks – Trends Since the IASB Published IFRS 9

Löw

Erkelenz

2022

Australian Accounting Review

View full text Add to dashboard Cite

IFRS 9 was introduced by the IASB in 2014 with a mandatory application in 2018. Three years later the IASB started a post‐implementation review project. Major concerns at a political level and from the (insurance) industry were raised about long‐term investment strategies that appear less favourable due to new measurement categories and impairment rules. Furthermore, it was expected that the new rules on categorisation would create more profit or loss (P/L) volatility. We show that concerns about banks' decreasing maturity investment behaviour and increased profit or loss volatility since the publication of IFRS 9 in 2014 could not be verified until 2020. Additionally, banks hardly use the fair value option in practice, which suggests it can be abolished. Finally, the paper finds that the fair value through other comprehensive income option for equity instruments has almost no importance for banks. The IASB should, therefore, abolish this category as well. Hence, the measurement categories could be reduced by two categories reducing complexity and increasing the decision usefulness of financial instruments accounting rules for investors.

show abstract

Section: Literature Reviewmentioning

confidence: 99%