The Intricacies of Climate-Related Risks on European Banks’ Estimation of Expected Credit Losses: Linking Proper Accounting of Climate Risks to Shareholder Required Returns
Chekani Nkwaira and Huibrecht Margaretha van der Poll
Global banks face a predicament amidst the dictates of IFRS9 accounting policies. Commencing in 2018, incurred losses plus expected losses are to be reported. Loss allowances on loans and advances should be set aside earlier and should therefore be higher than they would be pursuant to the impairment provisions of IAS39. This paper focused on a sample of the top 40 European banks by assets and assessed the transition from IAS39 to IFRS9 through panel data distinguishing credit risk allowances over distinct IAS39 and IFRS9 periods. Economic climate damage data was obtained from the European environmental agency website, and incurred losses as well as expected credit losses data was fetched from annual financial reports. A null hypothesis indicating that banks had lesser or equal IAS39 incurred losses than IFRS9 expected credit losses was tested and rejected. The relationship between economic damages and estimates of credit losses was investigated using a two-sample t-test and Pearson product-moment correlation. Results revealed that banks have been conservative in estimating credit losses since adopting IFRS9. Consequently, the paper contributes in revealing to banks the need to proactively account for climate damages in the wake of IFRS9. It prompts shareholders to incorporate economic climate-induced damages in risk/return decisions.
Keywords: Incurred Losses, Expected Credit Losses, Climate Economic Damages, IAS39, IFRS9
Can an Energy Autarky Private House be Economical? An Analysis Based on Germany
The energy self-sufficiency of private households is a very interesting topic against the background of the current developments in the world, such as power failures as a result of weather catastrophes and new infrastructure challenges as a result of transport electrification. There are various options available for achieving this goal. In the context of this work, a newly built single-family house in Germany with a photovoltaic system with a power storage system and a heat pump with surface heat collectors will be used to investigate whether energy autarky (for electricity and heat) can be economically designed – in comparison to a classic energy supply with electricity from the grid, and a gas condensing boiler heating system. The results show that, through the high gas and electricity prices, scenarios in Germany allow such an economical operation compared to the classic energy supply. However, a condition for this is always that there is a connection to the grid in order to be able to compensate for the differences between electricity supply and demand.
Keywords: Energy Autarky, Renewable Energy, Photovoltaics, Geothermal Energy, Profitability Analysis, Visualization of Financial Implications
The Relationship between Culture and Parental Financial Socialization
Culture has become an important aspect of parental financial socialization in rural and low-income areas across the world, and there is an increasing need for these studies in this field. This study heeds this call and investigates the relationship between culture and parental financial socialization in rural and low-income areas in South Africa. Parental financial socialization is measured through parental financial behavior, parental financial monitoring, parental financial discussion, parental financial communication, and parental financial teaching. A quantitative research approach is adopted in this study. A self-administered questionnaire is used to collect data in Fetakgomo Tubatse and Intsika Yethu municipalities, as they are the most rural and low-income areas in South Africa. Correlation analysis is used to analyze data. The results show a negative relationship between Culture and Parental financial socialization. Thus, parents who uphold cultural values are less likely to engage in parental financial socialization. Based on the results, this study provides important recommendations to parents, financial educators, and the government to improve parental financial socialization. This study also offers suggestions for future studies in the field of culture and parental financial socialization.
Keywords: Parents, Financial Socialization, Young Adults, Culture
Aksemsettin Mah. Kocasinan Cad.
Erenoglu Is Merkezi
Fatih – Istanbul, TURKEY
Email: [email protected]
This work is licensed under a Creative Commons Attribution 4.0 International License.