From IFRS 18 to FINREP: What changes for banks?

Introduction

On 8 July 2026, EBA published its Final Report incorporating IFRS 18 into the FINREP supervisory reporting framework. While FINREP has consistently evolved alongside changes in IFRS, this update has broader practical consequences for banks across Europe.

IFRS 18 does not change how income and expenses are measured. Instead, it changes how financial performance is presented by introducing a structured profit and loss statement built around operating, investing, and financing categories, together with a mandatory operating profit subtotal.

For banks, the significance of the EBA's work goes beyond a routine framework update. By reflecting IFRS 18 requirements in FINREP, the EBA has transformed financial statement presentation choices into supervisory reporting data.

This affects also banks that report under IFRS and institutions that apply local GAAP but are subject to FINREP reporting. For those banks, IFRS 18 concepts will flow into their regulatory submissions regardless of the accounting framework used for their statutory financial statements.

IFRS 18 in FINREP: What is really new?

The inclusion of IFRS 18 in FINREP is unsurprising. What is more significant is what this means in practice. By incorporating IFRS 18 into FINREP, the EBA is not only changing how profit and loss are presented, but also how performance is captured, compared, and assessed through supervisory reporting.

The timeline is the first challenge. IFRS 18 applies from 1 January 2027, while the revised FINREP requirements become mandatory from 30 September 2027. Institutions should therefore target to be operationally ready by January 2027 rather than waiting until September.

To understand why this matters, it is worth recalling the different purposes each framework serves. Financial statements are primarily designed to communicate financial performance to investors. FINREP, by contrast, provides supervisors with standardized information to assess institutions and compare banks across the sector.

Because FINREP applies consistently to all reporting institutions, the remapping exercise must bridge not only the old and new FINREP structures, but also the gap between local GAAP classifications and IFRS 18 concepts.

For this reason, the EBA has not simply reproduced IFRS 18 within FINREP. Instead, it has adapted the requirements to create a standardized supervisory profit and loss statement, designed to make banks’ performance more consistent and comparable.

Consequently, classification decisions previously viewed as accounting judgments now become supervisory data points.

In practice, the revised FINREP templates are reorganized around the IFRS 18 categories of operating, investing, and financing. Banks will need to revisit existing mappings and, in some cases, reassess how their activities are reflected in the new structure.

The EBA has also restricted some of the flexibility available under IFRS 18. Certain accounting policy choices permitted under IFRS 18 will not be available in FINREP, as supervisory reporting prioritizes comparability. Banks may therefore encounter differences between their statutory financial statements and FINREP submissions, requiring robust reconciliation processes.

Impacts on banks: From accounting choices to supervisory scrutiny

The classification of income and expenses is no longer solely an accounting exercise. It now directly influences how supervisors understand, compare, and assess banks’ performance. This also includes institutions that do not report under IFRS and must engage with IFRS 18 concepts for the first time through their regulatory returns.

The implications can be grouped into four areas:
 

a) Mapping and data model changes

Banks will need to revisit how income and expense items are captured, classified, and reported.

Key actions include:

• Mapping existing FINREP line items to the new operating, investing, and financing categories.
• Assessing whether current systems can produce the required granularity.
• Updating source systems, data models, and reporting logic.
• Ensuring that a consistent data set can support both financial statements and supervisory reporting. Banks that do not report under IFRS will face an additional step: translating local GAAP items into the IFRS 18-based FINREP categories without having already performed this classification for statutory purposes.

b) Managing the transition period

From January 2027, banks will need to prepare IFRS 18-compliant financial statements, while the new FINREP only becomes mandatory from September 2027. Unless supervisors require earlier adoption, banks will therefore have some additional time before the revised FINREP templates take effect. During the transition period, banks will need to prepare IFRS 18 financial statements alongside IAS 1-based FINREP.

To manage this effectively, institutions should plan for dual outputs from the same data set, build and test new mappings early, and define a clear cut-over process with sufficient resources for parallel reporting and reconciliation.

c) Controls and reconciliation

Where the EBA has restricted accounting options or prescribed specific supervisory treatments, differences may arise between statutory accounts and FINREP submissions. Banks will need robust internal control frameworks capable of identifying, documenting, and explaining those differences, applying classification rules consistently, documenting key judgments, and maintaining a transparent reconciliation trail.

d) Supervisory visibility and governance

FINREP is one of the primary tools used by supervisors to evaluate institutions. As IFRS 18 classifications become embedded in FINREP, presentational choices become data points that can be benchmarked against peers.

Supervisors will gain greater visibility into how institutions define operating activities, distinguish operating from non-operating performance, and compare with market practice. In practical terms, operating profit becomes a supervisory lens through which regulators read, compare, and challenge banks' business models, making it one of the most consequential changes introduced by this update.

Banks whose classifications differ significantly from those of their peers may attract closer scrutiny regarding the rationale and consistency of those decisions.

This is why IFRS 18 implementation should not remain solely within Finance. Boards and audit committees should understand the key judgments, assess whether they align with the business model, and ensure they can be explained consistently to auditors and supervisors.

Ultimately, the question is no longer only whether a classification complies with IFRS 18, but whether it is consistent with the bank's business model, supported by appropriate governance, and capable of withstanding supervisory scrutiny.

What banks should do now

Banks should focus on four immediate priorities:

1. Perform a comprehensive gap analysis: Compare current FINREP against the revised requirements to identify classification changes, data limitations, and potential divergences.
2. Update reporting mappings and data models: Initiate discussions with reporting service providers to assess implications and ensure timely implementation.
3. Strengthen governance around key judgments: The definition of main business activities directly shapes operating profit and will require involvement from senior management, the audit committee and the Board, supported by early dialogue with external auditors.
4. Prepare for supervisory discussions: Supervisors will challenge classifications that appear inconsistent with peers or misaligned to the business model. Banks should be ready to explain decisions and demonstrate they are subject to appropriate governance.

Conclusion

The integration of IFRS 18 into FINREP turns presentation choices into supervisory data and requires a substantial remapping exercise. It also brings banks that do not report under IFRS into the scope of IFRS 18 concepts through regulatory reporting.

The implications may extend beyond FINREP. If the underlying data model changes, banks should assess whether downstream reporting, including COREP and other prudential ratios, may also be affected.

The best-prepared institutions will be those that treat this as more than a reporting exercise. The challenge is ensuring that classifications are robust, explainable, and fit for supervisory scrutiny.