IFRS-9 influences on banking performance in terms of loan provisions

In recent years, importance of International Financial Reporting System 9 has increased considerably globally and especially in Turkey. Following the global financial crisis that began in 2008 in the United States, in order to make more robust banking sector, the International Financial Reporting Committee started to work and they published the latest version of IFRS 9 in June 2014. BRSA which was published in the official newspaper on June 22, 2016 "Regulation on the Procedures and Principles for the Classification of Loans and the Provisions" entered into force on 01.01.2018. Banks have started to calculate provisions at their balance sheet accounts base on this standart as of the date of 01.01.2018. In this study, firstly, it is explained how the loan provisions are calculated according to the previous regulation of BRSA, classification and measurement criterias for financial instruments with the transition to IFRS-9, and how the expected credit loss is calculated. These calculations are explained in detail in the study since this issue is very up-to-date and the literature is not enough. After describing the standards and calculations published in accordance with the previous BRSA regulations and IFRS 9, a sample loan portfolio was selected. There is credit from each loan stage within the selected loan portfolio. For the loans in each loan stage, the amounts of the loans' provisions were calculated and compared for two cases which are previous BRSA regulations and IFRS 9. For the first stage loans, BRSA regulations were found to be more conservative than IFRS-9. Since the first stage loans has no problem and they are more qualified than other stages loans, there should reserved less provision for first stage loans according to IFRS-9 standarts. Loans with a decline in credit worthiness are monitored in the second and third stages. IFRS-9 states that lifetime provision should be set aside for loans in the second and third stage. Even though, BRSA regulations were found to be more conservative, IFRS-9 standarts were found to be more conservative for second and third stage loans. Therefore, in accordance with IFRS 9, it has been reached that more provision should be set aside for these stages. As a result, it is predicted that there will be an increase of 4% in the loan provision figures when the total amount is taken into account. It is predicted that this increase in the allowance will cause a decrease in the net profit of the banks, but the effect on the banks' performance will be limited. Besides, the difference in the rating systems of the banks and the quality of the data stocks affect provision figures of each bank and it is suggested that this should be standardized.