Two Faces of Prudence: Why IFRS 9 Overlays and CRR Ill MoCs Are Similar, Different - and Often Misunderstood
The strong reaction to recent discussions around IFS 9 overlays and CRR Ill Margins of Conservatism (MoC) highlights how easy it is to conflate these two adjustment mechanisms. Both arise when models face uncertainty, data gaps, or limitations. Both have the effect of moving estimates away from "pure" model output. And both are seen by stakeholders as adding prudence. Yet beneath this surface similarity lie important differences in purpose, direction, and governance. Misunderstanding these...
