Learning Objectives:

  • Understand the implications of IFRS 9 for provisioning and capital.

  • Explain the impact of ESG factors on bank financial reporting.

  • Critically evaluate bank disclosure practices.

8.1 IFRS 9 – The New Paradigm

Impairment: The shift from “incurred loss” to “expected credit loss” (ECL) model has significant implications for provisioning and capital adequacy. Banks must recognise expected losses over the life of loans.

Classification and Measurement: More principles-based approach, with assets classified as amortised cost, fair value through OCI, or fair value through profit or loss.

8.2 ESG Reporting and Climate Risk

Banks increasingly need to report on ESG factors. The HKU Business School course examines “how modern banks engage in financial derivatives activities and their reporting” . Key areas include:

  • Climate-Related Risk Disclosures: Physical and transition risks.

  • Green Finance Reporting: Financing of environmentally sustainable projects.

8.3 Critical Evaluation of Disclosure

The HKU Business School course requires students to “critically assess various risk exposure and performance” . This includes evaluating:

  • Adequacy of Risk Disclosures: Whether reports provide sufficient information.

  • Potential for Mis-Reporting: Identification of weaknesses in disclosure.

  • Ethical Dimensions: The responsibility of banks to report accurately.

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