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Accounting professionals have called for the adoption and effective implementation of International Financial Reporting Standard (IFRS) 9 to strengthen risk assessment, restore public trust and improve transparency in Bangladesh's banking sector.
For years, loan classification and provisioning in the country have been governed by regulatory circulars issued by the central bank, largely based on an incurred-loss model under which banks recognize losses and make provisions only after they occur.
With bad loans weighing heavily on the banking system, Bangladesh Bank is now moving towards adopting IFRS 9, an accounting standard that replaces the existing loss-recognition framework with forward-looking risk management. The central bank has planned to implement the "expected credit loss" (ECL) model for all scheduled banks by 2027.
Accounting experts stressed the importance of deploying IFRS 9 at a discussion organised by Rahman Rahman Huq (RRH), Chartered Accountants-a member firm of KPMG International-at a city hotel on Monday. The event, aimed at enhancing understanding of the ECL model, related tools and global best practices, was attended by managing directors, chief executive officers, chief financial officers, chief regulatory officers, and heads of credit and finance from various scheduled banks.
One of the participants, Adeeb H Khan, senior partner of RRH, said the expected credit loss model is not merely a change in accounting methodology but represents a fundamental shift in how banks assess risks and make decisions.
"IFRS 9 is timely, necessary and aligned with global developments, but it also demands a new way of thinking. It is forward-looking, data-driven and grounded in disciplined risk management," he said.
However, concerns have been raised about the enforcement of the central bank's 2027 roadmap, as many banks are already under pressure from liquidity shortages.
"A clearer picture will emerge after the December closure," said Md Touhidul Alam Khan, managing director and CEO of NRBC Bank, in a phone conversation with The FE.
"There is no alternative to enforcing IFRS 9 for the sake of the overall banking sector," he said, adding that the model leaves no scope for concealing information as the accounting system will become largely automated.
Neighbouring countries such as Sri Lanka, India and Pakistan have already implemented IFRS 9.
"It's a mirror of banks' future. For example, if a bank has approved a loan of Tk 100 million but disbursed only Tk 20 million, it will still have to keep provisions considering the entire approved amount," Touhidul said. This approach, he added, would help banks remain protected against future loan recovery risks.
Speakers at the discussion echoed the same view, saying successful implementation of IFRS 9 would make the banking sector more resilient and attractive to foreign investors by strengthening international confidence.
They also said IFRS 9 is long overdue for Bangladesh's financial sector.
Khan noted that the standard touches the core of banking operations, including credit decisions, portfolio quality, capital planning, pricing and, ultimately, profitability.
"That is why this conversation must go beyond accounting compliance and address how risk is measured and managed in day-to-day business," he said.
Muhammad Mehedi Hasan, partner at RRH, Chartered Accountants, and Raditha Alahakoon, partner at KPMG Sri Lanka, jointly presented a keynote paper during the technical session. Preeti Saharan, partner at FRM, KPMG India, joined the event virtually.
Raditha highlighted the practical challenges associated with IFRS 9 implementation, noting that weak data availability, gaps in risk modelling and technological limitations were among the major hurdles.
Another key challenge, he said, would be incorporating forward-looking information, as many banks lack sufficient historical data to generate reliable "probability-weighted estimates".
To overcome these challenges, accounting experts recommended greater investment in robust technology platforms to support automation, data integration and real-time reporting.
The speakers also stressed that effective IFRS 9 implementation would require coordinated efforts from key regulators, including Bangladesh Bank.
They advised banks to strengthen governance frameworks and oversight mechanisms and to revisit portfolio segmentation strategies to better align them with risk profiles and regulatory requirements.
Meanwhile, Pubali Bank has already appointed a foreign consultant to implement IFRS 9, said its managing director Mohammad Ali.
According to him, around one-third of the country's 61 banks would be able to implement the standard by 2027.
"All banks should implement IFRS 9. Some increased figures will be revealed as a result, but shareholders have a right to know the actual position of the banks," Ali said.
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