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IFRS 9 Implementation and Bank Performance in Cambodia during the COVID-19 Pandemic
(November 15, 2024) Casey Barnett; Vouthraboth Oum; Ubol Yon; Phaneth Chheng; Bunna Chhut; Narin Choeun
IFRS 9 Financial Instruments introduced an expected loss model for recognizing loan loss provisions that recognize loan losses earlier than required by the previous standard IAS 39 Financial Instruments. Commercial banks in Cambodia were required to follow IFRS 9 starting from January 1, 2019. This chapter analyzes the financial data of 25 banks for the years 2019–2023 to understand the impact of IFRS 9 expected credit losses on bank performance and loan loss provisions. The chapter also provides a historical overview of bank loan provisioning in Cambodia, which may help future researchers understand a shift in Cambodian bank performance subsequent to IFRS 9 adoption in 2019. The global financial crisis of 2007–2009 saw the implosion of long-standing commercial banks, investment banks, and insurance companies, which had balance sheets inflated with worthless debt investments, especially securitized debt (Acharya et al., 2009). The collapse of these financial institutions was partly due to over-investment in risky financial assets, the losses of which were not recognized by the fair value accounting used at that time (Acharya et al., 2009). Earlier recognition of these losses could have supported institutions in shoring up capital (Gunn et al., 2018).