’ loan loss provisioning and severely impact on their regulatory capital. this direct impact on banks ’ cost of capital would be amplified by massive changes in banks ’ systems and processes, significant investment in people and it infrastructure and a change in mind - set altogether at board and management level. it is very likely that banks would pass on these costs to borrowers and depositors. in view of the impact on regulatory capital and the limited time remaining to 1 january 2018, the basel committee on banking supervision released a statement on 31 march 2017 on the interim regulatory treatment of accounting provisions and standards. the statement, while encouraging the use of the expected credit loss model noted its significant impact on regulatory capital and banks ’ provisioning practices in ‘ qualitative and quantitative ways ’. the bcbs would also “ thoroughly review the longer - term regulatory treatment of provisions ” and that “ jurisdictions may adopt transitional arrangements to smooth any potential significant negative impact on regulatory capital arising from the introduction of ecl accounting. ” initiatives taken by the bank of mauritius the bank is also in the process of adopting ifrs9 and we have been working closely with our external auditors to review systems and processes at the bank. at this stage, it is still work - inprogress. with regard to the bank ’ s supervisory role in overseeing that banks meet the deadline of 1 january 2018, a meeting was held with external auditors of banks in march 2016 to gauge their state of preparedness and the comfort was given to the regulator that they will lean on their group support and expertise to assist banks in transforming their systems and processes to meet the requirements of ifrs9. the external auditors were told that the bank would not wish to see the same accounting firm providing consultancy and advisory services to the client on the one hand and concurrently be the one validating and auditing the model on the other hand. in this respect, the central bank envisages to hire the services of an accounting firm to carry out the validation exercise on its behalf as it might not have the expertise to do so as early as january 2018. subsequently in april 2016, the bank of mauritius requested banks to submit an ifrs 9 implementation roadmap vetted by their external auditors. a follow - up letter was issued in november 2016 to request banks to submit an ifrs 9 action plan with defined timelines, provide 2 / 3 bis central bankers'speeches quarterly progress reports on the implementation status, and to make a presentation to the bank covering various aspects

in anticipation of the rolling - out of ifrs9 had to enlist the services of statisticians, economists, and econometricians. and the discussion, surprisingly, was not about accounting but about data, databases, and building models – a realm in which economists and econometricians, unlike accountants, generally excel. the rest of my remarks will touch briefly on ifrs9 as a new accounting standard in replacement of ias39, thereafter the initiatives of the bank of mauritius with regard to the implementation of ifrs9 will be reviewed and finally, i ’ ll end with a concluding note. the circumstances which brought about ifrs9 are well known by now. post gfc 2008, at the request of the g20 and the financial stability board, the international accounting standards board ( iasb ) stepped up its work to replace ias39, which had started in the early 2000s, and in july 2014, the iasb released the new accounting standard ifrs9. there are 3 aspects of ifrs9 namely ( 1 ) classification and measurement of financial instruments ; ( 2 ) impairment ; and 1 / 3 bis central bankers'speeches hedge accounting. the main focus of my remarks will be on impairment. loan - loss provisioning under ias39 was deemed to be too little too late as the incurred loss model required objective evidence of impairment, such as an actual loss event occurring, in order for provisions to be booked. the backward - looking incurred loss model was conflicting with the prudential regulation on credit risk management as enunciated in the bcbs core principles for effective supervision. ifrs9 expected loss model is forward - looking and more aligned to prudential regulation with regard to credit risk management. the expected loss model computation will not only use historical loss experience data but also all information available whether current or future, including macroeconomic factors. further, banks will have to start provisioning on the very day the loan is booked based on expected losses over a 12 - month period, i. e. on stage 1. should credit risks increased significantly as a result of macroeconomic or financial factors relative to the initial recognition at stage 1, provisioning would increase accordingly based on lifetime expected losses computation. the move from stage 1 to stage 2 will depend on whether there is a significant change in credit risks. stage 3 is where there is evidence of impairment. deloitte ’ s global ifrs banking surveys have revealed that the expected credit loss model would substantially increase banks