“These measures are aimed at ensuring that banks are able to continue to lend to households and businesses, support the real economy, and provide robust and consistent market disclosures,” he wrote.
Under a global accounting rule known as IFRS 9, banks are required to provision for losses on loans to businesses as soon as credit risks increase, raising fears that provisioning will balloon given large parts of the economy are at a standstill.
Woods said it was critical banks take “well-balanced” decisions that also bear in mind actions already taken by government to help borrowers such as repayment holidays.
“We are thinking about what further steps could be taken to enhance the robustness of, and bring greater consistency in, the application of IFRS 9,” Woods said.
There was a need to “tread carefully” and think through things afresh and in detail, he added. “That will take time.”
The FRC measures include postponing by up to two years a requirement on companies to hold public tenders every 10 years for an auditor, a time-consuming and costly exercise.
Accountants may not be able to gather all the data they need to complete a full audit, the FRC said.
“Given the uncertainty about the immediate outlook for many companies, more audited financial statements…may cast significant doubt upon the entity’s ability to continue as a going concern,” the FRC said.
Accountants PwC said company directors and auditors will all need to perform more work on going concern judgments, and there is a greater likelihood of modifications to audit opinions.
Last Saturday the FCA announced a two-week moratorium for all listed company on their preliminary annual statements.
On Thursday it said it would now allow listed companies an extra two months – to six months after the end of their financial year – to complete their audited financial statements, pushing publication of statements to August or September.
The FCA also said it would not suspend a company’s listing if it published financial statements within six months of their year-end.
But without a shift in market practice, the relief measures will not be effective, the FCA said.
“We urge market participants not to draw undue adverse inferences when companies make use of the extra time our temporary relief gives them. For a great many companies it will be a sensible decision to make in unprecedented times,” the FCA said.