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    US Agencies Propose Revisions to Capital Rules to Phase in CECL

    May 14, 2018

    U.S. Agencies (FDIC, FED, and OCC) issued a joint proposal to address changes to the U.S. generally accepted accounting principles (GAAP) described in the Accounting Standards Update on Financial Instruments—Credit Losses (ASU 2016-13); the proposal covers implementation, by banking organizations, of the current expected credit losses (CECL) methodology. Comments on the proposal will be accepted by July 13, 2018.

    The proposal would revise the U.S. agencies’ regulatory capital rules to identify which credit loss allowances under the new accounting standard are eligible for inclusion in regulatory capital and to provide banking organizations the option to phase in the day-one adverse effects on regulatory capital that may result from the adoption of the new accounting standard. The proposal would also amend certain regulatory disclosure requirements to reflect applicable changes to the U.S. GAAP covered under ASU 2016-13. In addition, the U.S. agencies are proposing to amend their stress testing regulations to ensure that covered banking organizations that have adopted ASU 2016-13 would not include the effect of ASU 2016-13 on their provisioning for the purpose of stress testing until the 2020 stress test cycle. Finally, the U.S. agencies proposed to make conforming amendments to their other regulations that reference credit loss allowances.

     

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    Comment Due Date: July 13, 2018

    Keywords: Americas, US, Banking, Accounting, CECL, ASU 2016-13, Proportionality, Stress Testing, US Agencies

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