Featured Product

    US Agencies Announce Changes to SA-CCR and CECL Rules Due to COVID-19

    In light of the recent disruptions in economic conditions due to the COVID-19 outbreak, US Agencies (FDIC, FED, and OCC) announced two actions to allow banking organizations to continue lending to households and businesses. The first action is in the form of a notice that allows depository institutions and depository institution holding companies to implement the final rule on standardized approach for calculating the exposure amount of derivative contracts (SA-CCR rule) for the first quarter of 2020, on a best-effort basis. This notice will become effective on the date of its publication in the Federal Register. The second action is in the form of an interim final rule that allows banking organizations to mitigate the effects of the current expected credit loss (CECL) accounting standard in their regulatory capital. Comments on the interim final rule must be received no later than 45 days after the date of publication in the Federal Register. The interim final rule will become effective on the date of its publication in the Federal Register. Additionally, US Agencies issued a joint statement that provides clarification related to the interaction between the interim final rule on CECL and the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) for purposes of regulatory capital requirements. The CARES Act provides banking organizations optional temporary relief from complying with CECL (statutory relief) ending on the earlier of the termination date of the current national emergency, declared by the President on March 13, 2020 under the National Emergencies Act concerning COVID-19 or December 31, 2020 (statutory relief period).

    Notice on SA-CCR Rule

    US Agencies issued a notice to allow early adoption of the methodology on how certain banking organizations are required to measure counterparty credit risk derivative contracts. US Agencies recently adopted the SA-CCR rule that implements the new SA-CCR approach for calculating the exposure amount of derivative contracts under the regulatory capital rule. The SA-CCR rule also revises other aspects of the capital rule related to total leverage exposure and the cleared transactions framework. The agencies are allowing a banking organization the flexibility to implement the SA-CCR rule, including the SA-CCR methodology and the other amendments described in the SA-CCR rule, one quarter early and on a best-effort basis if the banking organization chooses to do so.

    The SA-CCR rule was issued with an effective date of April 01, 2020. For advanced approaches banking organizations, adoption of the SA-CCR methodology is mandatory beginning January 01, 2022. The SA-CCR rule included several other amendments to the capital rule that come into effect as of April 01, 2020. A banking organization that elects to adopt the SA-CCR methodology must adopt the SA-CCR methodology for all derivative contracts; it cannot implement the SA-CCR methodology for a subset of its derivative contracts. The agencies expect to make related amendments to the Call Report FFIEC 101 and the FR Y-9C report, as applicable, filed as of March 31, 2020, to reflect this notice. FED has published a separate Federal Register notice which temporarily revises the instructions for the FR Y-9C to permit banking organizations to report data in a manner consistent with the SA-CCR rule beginning with the FR Y-9C report as of March 31, 2020 on a best effort basis. These amendments to FFIEC 101 will be addressed in a separate Federal Register notice or notices. Adopting the SA-CCR rule on a best-effort basis for the first quarter of 2020 is optional for all banking organizations subject to the capital rule. April 01, 2020 will remain to be the effective date for the SA-CCR rule while January 01, 2022 will remain as the mandatory compliance date.

    Interim Final Rule on Revised Transition of CECL Methodology

    US Agencies are inviting comment on an interim final rule that delays the estimated impact on regulatory capital, stemming from the implementation of Accounting Standards Update No. 2016-13 on measurement of credit losses on financial instruments (Topic 326). The interim final rule provides banking organizations that adopt CECL during the 2020 calendar year with the option to delay for two years the estimated impact of CECL on regulatory capital, followed by a three-year transition period to phase out the aggregate amount of the capital benefit provided during the initial two-year delay. The interim final rule does not replace the current three-year transition option in the 2019 CECL rule, which remains available to any banking organization at the time that it adopts CECL. 

    A banking organization is eligible to use the interim final rule’s five-year transition if it was required to adopt CECL for purposes of U.S. GAAP (as in effect January 01, 2020) for a fiscal year that begins during the 2020 calendar year and if it elects to use the transition option in a Call Report or FR Y-9C (electing banking organization). The interim final rule provides electing banking organizations with a methodology for delaying the effect on regulatory capital of an estimated amount of the increase in the allowance for credit loss (ACL) that can be attributed to the adoption of CECL, relative to the increase in the allowance for loan and lease losses (ALLL) that would occur for banking organizations operating under the incurred loss methodology.

     

    Related Links

    Comment Due Date: May 15, 2020

    Effective Date: March 31, 2020

    Keywords: Americas, US, Banking, Securities, SA-CCR, CECL, COVID-19, Financial Instruments, IFRS 9, Topic 326, Derivatives, Credit Risk, Regulatory Capital, ALLL, Reporting, Call Reports, FR Y-9C, US GAAP, US Agencies

    Featured Experts
    Related Articles
    News

    EBA Publishes Phase 2 of Technical Package on Reporting Framework 2.10

    EBA published phase 2 of the technical package on the reporting framework 2.10, providing the technical tools and specifications for implementation of EBA reporting requirements.

    July 10, 2020 WebPage Regulatory News
    News

    FASB Proposes to Delay Implementation of Insurance Contracts Standard

    FASB issued a proposed Accounting Standards Update that would grant insurance companies, adversely affected by the COVID-19 pandemic, an additional year to implement the Accounting Standards Update No. 2018-12 on targeted improvements to accounting for long-duration insurance contracts, or LDTI (Topic 944).

    July 09, 2020 WebPage Regulatory News
    News

    APRA Updates Regulatory Approach to Loan Deferrals Amid COVID Crisis

    APRA updated the regulatory approach for loans subject to repayment deferrals amid the COVID-19 crisis.

    July 09, 2020 WebPage Regulatory News
    News

    BCBS and FSB Set Out Recommendations for Benchmark Transition

    BCBS and FSB published a report on supervisory issues associated with benchmark transition.

    July 09, 2020 WebPage Regulatory News
    News

    IAIS Sets Out Recommendations for Benchmark Transition for Insurers

    IAIS published a report on supervisory issues associated with benchmark transition from an insurance perspective.

    July 09, 2020 WebPage Regulatory News
    News

    ESMA Updates Reporting Manual on European Single Electronic Format

    ESMA updated the reporting manual on the European Single Electronic Format (ESEF).

    July 09, 2020 WebPage Regulatory News
    News

    EBA Calls on Resolution Authorities to Consider Impact of COVID Crisis

    EBA published a statement on resolution planning in light of the COVID-19 pandemic.

    July 09, 2020 WebPage Regulatory News
    News

    BCBS Finalizes Revisions to Credit Valuation Adjustment Risk Framework

    BCBS Finalizes Revisions to Credit Valuation Adjustment Risk Framework

    July 08, 2020 WebPage Regulatory News
    News

    ECB Guideline on Materiality Threshold for Credit Obligations Past Due

    ECB published a guideline (2020/97), in the Official Journal of European Union, on the definition of materiality threshold for credit obligations past due for less significant institutions.

    July 08, 2020 WebPage Regulatory News
    News

    FED Temporarily Revises FR Y-14 With Respect to PPP and CARES Act

    FED temporarily revised the capital assessments and stress testing reports (FR Y-14A/Q/M) to implement the changes in response to the COVID-19 pandemic.

    July 08, 2020 WebPage Regulatory News
    RESULTS 1 - 10 OF 5458