SAS 3763-2019 IFRS 9 : Using SAS / ETS ® Software and SAS ® Studio to Select Macro Economic Variables

Content Provider	Semantic Scholar
Author	Filho, Julio Alberto Campa Vega
Copyright Year	2019
Abstract	Published in 2014 by the International Accounting Standards Board (IASB), applying IFRS 9 (International Financial Reporting Standard) to financial instruments will be mandatory beginning January 1, 2021, in accordance with the Central Bank of Brazil. As the impairment model for IFRS 9 is forward-looking, banks in Brazil are required to consider future economic scenarios to calculate ECL, which brings new challenges to modeling teams. In particular, we have identified a set of conditions that make monetary and fiscal policy mutually influence each other in a perverse way. One of these conditions is what we call fiscal dominance: an increase in the interest rate makes public debt dynamics unsustainable, which leads to a rise in the inflation rate rather than a reduction. If this hypothesis is confirmed, the entire IFRS 9 modeling structure should be based on these assumptions, since the forward-looking PDs or the expected credit loss (ECL) calculation would not only include macroeconomic variables related to the respective sector, but also asset prices that affect the whole system. In that case, there was a scenario in which the individual PDs suffer from systematic influence of a widespread increase of risk caused by an increased likelihood of default of sovereign debt in relation to the monetary policy tightness. We have developed a set of models, VAR/VECM, and related tests using SAS/ETS® and SAS Studio® to evaluate that theory.
File Format	PDF HTM / HTML
Alternate Webpage(s)	https://www.sas.com/content/dam/SAS/support/en/sas-global-forum-proceedings/2019/3763-2019.pdf
Language	English
Access Restriction	Open
Content Type	Text
Resource Type	Article