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IAS 39 is an accounting standard published by the International Accounting Standards Board that covers the recognition and measurement of financial instruments. It was replaced by IFRS 9 in 2018.
Under IAS 39, banks would set aside losses for assets only at the point of impairment, the so-called ‘incurred loss’ model. Because banks used past events to determine provisions, the regime was perceived as fuelling procyclicality after the global financial crisis.