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Factors Affecting the Creation of Non-Performing Loans in the Iranian banking Industry and estimating the Effects of its measurement based on the implementation of IFRS requirements
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Ghasem Bolo1   , Mina Mosaddar * 2 |
1- Allameh Tabataba'i University
2- Monetary and Banking research institue |
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Abstract: (452 Views) |
How to identify, measure and Write-Off of Non-Performing loans under Iranian accounting standards is significantly different from IFRS. The purpose of this study is to identify the factors affecting the creation and increase of Non-Performing loans (NPLs) in the Iranian banking industry and the effects of measuring it through the implementation of IFRS. In this regard, after conducting a Systematic Review, a questionnaire (including 20 questions) was designed and sent to collect the opinions of experts and financial reporting staff of banks. Received responses (with a return rate of 90%) were analyzed using a specific fuzzy logic method.
The results show that some features of the financial reporting environment of banks in Iran such as the structure of the economic environment, weak accountability mechanisms, weak corporate governance and internal control structures, inefficiency of the Receivables collection process have created and increased Non-Performing loans in the Iranian banking industry.
The high volume of NPLs in the Iranian banking industry is one of the main challenges in implementing IFRS. Because there is a significant difference in how the loans are measured according to Iranchr('39')s accounting standards and the provision regulations of the Central Bank of the Islamic Republic of Iran With the requirements of IFRS, the net value of the balance sheet and the capital adequacy ratio of banks are significantly reduced by the initial measurement of loans at fair value. In addition, a strict and forward-looking approach to provision regulations based on the Expected Credit Loss Model (ECL) will increase the provisions of doubtful receivables of banks and will have a double negative effect on the capital adequacy ratio. |
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Full-Text [PDF 1066 kb]
(165 Downloads)
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Type of Study: Case Study |
Subject:
Corporate Finance and Governance (G3)
Received: 2021/08/14 | Accepted: 2022/03/6 | Published: 2023/05/1
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