The average provision coverage ratio has increased by 28% across the four countries. The increase has been highest for Qatar and Kingdom of Saudi Arabia. The impact of ECL for most of the Banks in UAE has been up to 2% of the loans and advances whereas, the impact on banks in the KSA have been highest. In Bahrain, the impact of ECL has been in the range of 1% to 4% of loans and advances (L&A). The region as a whole is looking at an increase in provision, impacting the accumulated profits by 14.28%. The overall provisions under IFRS 9 have remained to be around 3.96% of the loans and advances.

The marked variability in numbers poses a particular conundrum for the regulators ? how do they ensure that numbers are not 'gamed' and yet not do away with the 'principle' driven nature of the guidelines. How does one ensure the integrity of the numbers, and that banks are not engaging in methodology-arbitrage? Given the subjectivity across ECL models among banks, there is a need for banks to be able to demonstrate appropriateness of methodologies used and design a robust model governance framework.

Key developments to watch out for

• Considering the principle driven nature of guidelines, it remains to be seen if some banks revise their estimates in Q1 2018
• I ncreased emphasis on reviewing the ECL models and governance to manage model risk.
• The quality of IFRS9 implementation at banks will be assessed by stakeholders via the coverage and depth of the quantitative and qualitative disclosures
• The Central Banks may alternatively prescribe minimum set of qualitative and quantitative disclosures which could ease comparability of numbers across banks.