S&P Global Ratings does not expect widespread changes to banks' issuer credit ratings as a result of the new International Financial Reporting Standards 9, "Financial Instruments", even though credit-loss provisions will increase.One of the key aims of the new standard is to address the issue of delayed recognition of credit losses in financial reporting, which came to the forefront during the financial crisis. To address this perceived shortcoming, IFRS 9 shifts the accounting of credit losses to a more forward-looking "expected credit loss" impairment model. This will require earlier recognition of credit losses in banks' financial reporting than under the "incurred loss" approach of the previous accounting standard IAS 39.IFRS 9 came into force for accounting periods beginning on or after 1 January this year, so for a large majority of banks reporting under IFRS, the first annual accounts that incorporate the new rules will be the accounts for the year ended 31 December, 2018.In the short term, the adoption of IFRS 9 is likely to increase such provisions on initial adoption and provoke greater volatility thereafter. Nevertheless, the impact on CET1 regulatory capital ratios "will likely be limited," S&P predicts, adding that the Basel Committee has issued amendments to Basel III capital rules to allow the impact of IFRS 9 to transition into regulatory capital over a period of three to five years, with full disclosure required of the fully loaded impact on capital over that period.Indeed, as HSBC stated in its presentation to investors overnight: "Implementation of IFRS 9, including benefits from classification and measurement changes, is expected to result in a favourable impact on our CET1 ratio applying the European Union's capital transitional arrangements. The fully loaded day one impact is expected to be negligible."And unless there are weaknesses apparent, S&P Global will be taking a pragmatic approach to recasting its bank ratings: "The higher credit-loss provisions will be reflected immediately in full in our capital measures for 2018, but we don't expect widespread changes to our ratings on initial adoption, given that it is change in reporting - not a change in underlying economic activity," said S&P Global Ratings credit analyst Osman Sattar in a report published this week.In the report, Sattar point outs that provisioning will vary markedly from bank to bank, increasing complexity and lessening comparability, which is a big disadvantage for investors, not least because of the diverging IFRS and US GAAP approaches. "The potential risks that IFRS 9's earlier and higher provisioning requirements could amplify the swings of the economic cycle are not yet clear," said Sattar. "Full and consistent application of the rules, which may require regulatory encouragement and monitoring, will lessen such pro-cyclicality risks." The impact of IFRS 9 will be felt by banks across much of the world, with the notable exceptions of the US and Japan. In the US, new rules on accounting for credit losses, which differ from IFRS 9, do not take effect until 2020 at the earliest. In Japan, most banks will continue to report