Application Analysis Of Expected Credit Loss Model In A Commercial Bank

Since the shortcomings of the lost model itself can no longer be adapted to the complex and diverse changes in financial instruments,the IASB began the revision of the accounting standards for financial instruments in the aftermath of the 2008 financial crisis.In July 2014,the International Accounting Standards Board(IASB)issued the latest version of the IFRS 9 financial instrument for the reform of international financial instruments.China followed the international footsteps,in March 2017 also issued the revised "Enterprise Accounting Standards No.22nd-Financial Instrument recognition and measurement(here in after referred to as the new financial Instrument guidelines),in which the financial assets impairment model has undergone great changes,from "the Incurred Loss Model" to" Expected Credit Loss Model".The main difference between the Expected Credit Loss Model and the Incurred Loss Model is that the Expected Credit Loss Model does not require the triggering of an objective impairment event,and the future expected credit loss needs to be considered when calculating the actual interest rate.In addition,when applying the Expected Credit Loss Model,the financial instrument is divided into three stages by judging whether the probability of default is significantly increased compared to the initial confirmation.Financial assets,especially loans and customer advances,are the main assets of commercial banks.The impact of changes in the financial asset impairment model on the banking industry is undoubtedly obvious.According to the requirements of the Ministry of Finance,some A+H banks in China have implemented the new financial instruments guidelines on January 1,2018,The impact of The Expected Credit Loss Model on banks has already begun to take shape.In order to allow other banks to pay attention to the application of the Expected Credit Loss Model,try to reduce the impact of the application of the Expected Loss Model on the bank industry,ensure the stable operation of the bank industry,and study the application of the Expected Credit Loss Model in the bank is looming.This paper uses the case study method,firstly compares the old and new impairment models of nine A+H commercial banks that have applied the Expected Credit Loss Model on January 1,2018,and selects the A commercial bank as the case of this paper.By studying the 2018 annual report of A commercial bank,this paper first analyzes the specific way of A bank’s application of the Expected Credit Loss Model,and then analyzes changes of the financial statements level of A bank and risk management policy under the two different models.Then it discusses the challenges that Chinese commercial banks may face when applying the Expected Credit Loss Model,and put forward the strategies that Chinese banks should make when applying the Expected Credit Loss Model based on the industry perspectives.Compared with the theoretical or simulation case studies of many scholars and experts before,this paper presents the exact and the true effect of A commercial bank’s application of the Expected Credit Loss Model,which causes the attention of other banks that have not implemented the Expected Credit Loss Model.It will provide a reference for these banks to apply the Expected Credit Loss Model in the future,so that Chinese banks can better cope with the challenges brought by the Expected Credit Loss Model.