The Monetary Board, the policy-making body of the Bangko Sentral ng Pilipinas, approved the guidelines on the adoption of the Philippine Financial Reporting Standards 9.
The Bangko Sentral said in a statement PFRS 9 required the adoption of the expected credit loss in recognizing impairment. The model requires early recognition of allowance for credit losses even before the default or non-payment of the borrower.
The Bangko Sentral adopted the approach as embodied in the “Guidelines on Sound Credit Risk Management.”
The central bank’s earlier issuance amending the definitions of past due and non-performing loans also paved the way for the implementation of the ECL methodology in booking allowance for credit losses.
“The policy sets out the supervisory expectations in classifying and measuring financial instruments and in recognizing impairment to promote prudence and transparency in financial reporting,” the Bangko Sentral said.