Letter from David Bailey 'Thematic feedback on accounting for IFRS 9 expected credit losses (ECL)'

Why this matters

This letter from the PRA's Executive Director communicates formal supervisory feedback on expected credit loss accounting governance, model risk management, and climate risk integration across the banking sector. It identifies specific areas of focus (data governance, model monitoring, climate risk assessment, securitisation, recovery strategies) that will be monitored through written auditor reports and supervisory engagement. While not a new binding rule, it represents a significant policy statement with concrete regulatory expectations affecting all major UK deposit-takers and their auditors, with forward-looking supervisory priorities for 2027. The content addresses prudential soundness, governance frameworks, and financial reporting quality—core regulatory concerns.

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