This Exposure Draft sets out the Bank’s proposals on the transitional arrangements for regulatory capital treatment of accounting provisions. Development Financial Institutions which elect to apply the transitional arrangements are allowed to add back a portion of the Stage 1 and Stage 2 provisions for expected credit losses (ECL) to Tier 1 Capital over a four-year period from financial year beginning 2020 or a three-year period from financial year beginning 2021. The proposals are consistent with the guidance issued by the Basel Committee of Banking Supervision on “Regulatory treatment of accounting provisions – interim approach and transitional arrangement” (March 2017) and “Measures to reflect the impact of Covid-19” (April 2020).

This Exposure Draft is to be read together with the policy document on Capital Framework for Development Financial Institutions dated 22 February 2008, with the new paragraphs to be added in the policy document.

The Bank invites written feedback on the proposals in this Exposure Draft, including suggestions on areas to be clarified and alternative proposals that the Bank should consider. The written feedback should be supported with clear rationale, including accompanying evidence or illustration where appropriate, to facilitate an effective consultation process.

Responses must be submitted to the Bank by 30 October 2020.

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1. Transitional Arrangements for Regulatory Capital Treatment of Accounting Provisions Exposure Draft
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