Regulatory Alerts2026-02-09
Methodological Guidelines for Applying IFRS 9 to Asset Classification and Loan Loss Provisioning
The Management Board of the Central Bank of Azerbaijan issued these guidelines to standardize how banks classify financial assets and calculate expected credit loss provisions under IFRS 9. The document mandates rigorous SPPI testing, defines explicit Stage 1 through Stage 3 transition criteria based on probability of default and delinquent days, and establishes quantitative thresholds for purchased or originated credit-impaired assets. Banks must apply these classification and impairment rules prospectively, utilizing symmetrical stage transitions, LIFO-based delinquency counting, and predefined triggers to ensure consistent loan loss provisioning across corporate and retail portfolios.
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