Featured Product

    US Agencies Consult on Policy Statement on Allowance for Credit Losses

    October 17, 2019

    US Agencies (FDIC, FED, NCUA, and OCC) are consulting on the policy statement on allowances for credit losses and on the guidance on credit risk review systems. The policy statement is intended to promote consistency in the interpretation and application of FASB credit losses accounting standard as codified in the FASB Accounting Standards Codification Topic 326. This accounting standard is covered in the FASB Accounting Standards Update 2016-13 and it introduces the current expected credit losses (CECL) methodology. The guidance discusses sound management of credit risk, a system of independent, ongoing credit review, and appropriate communication regarding the performance of the institution’s loan portfolio to its management and board of directors. The comments on each proposal will be accepted until December 16, 2019. The policy statement would become effective at the time of the adoption of the credit losses accounting standard.

    The proposed interagency policy statement describes the measurement of expected credit losses using the CECL methodology and updates concepts and practices detailed in the existing supervisory guidance that remain applicable. The policy statement describes the CECL methodology for determining allowances for credit losses that are applicable to financial assets measured at amortized cost, including loans held-for-investment, net investments in leases, held-to-maturity debt securities, and certain off-balance-sheet credit exposures, in accordance with the Topic 326. It also describes the estimation of an allowance for credit loss for an impaired available-for-sale debt security in accordance with the Subtopic 326-30. Additionally, the policy statement includes and updates concepts and practices detailed in the existing Allowance for Loan and Lease Losses (ALLL) policy statements that remain relevant under Topic 326. After the Topic 326 becomes effective for all institutions, the agencies will rescind the ALLL policy statements. CECL becomes effective for most public financial institutions beginning in 2020 and FASB recently decided to defer the effective date of CECL for all other institutions to 2023. The policy statement will not create any new or revise any existing collections of information. Therefore, no information collection request will be submitted to the OMB for review. 

    The proposed guidance on credit risk review systems is relevant to all institutions supervised by the agencies and aligns with the Interagency Guidelines Establishing Standards for Safety and Soundness, which set out safety and soundness standards for insured depository institutions to establish a system for independent, ongoing credit risk review and including regular communication to its management and board of directors regarding the institution's loan portfolio performance. The guidance includes updates to reflect current industry credit review practices as well as terminology to align with the CECL methodology. The guidance outlines principles for use in developing and maintaining an effective credit risk review system. The extent to which the principles discussed in the proposed guidance are applicable depend on an institution's size, complexity, loan type, risk profile, and risk management practices. The proposed guidance also outlines characteristics of an effective credit risk rating framework, including the factors used to assign ratings to promote an effective risk review by qualified, independent parties. The proposed guidance will be issued as a stand-alone document and not as part of loan-loss reserve guidance, to highlight the important role of credit risk review systems in the overall risk management program of an institution.

     

    Related Links

    Comment Due Date: December 16, 2019

    Keywords: Americas, US, Banking, Accounting, Credit Risk, CECL, IFRS 9, Credit Losses Standard, Leases Standard, IFRS 16, Credit Ratings, US Agencies

    Featured Experts
    Related Articles
    News

    Regulators Fine Goldman Sachs for Risk Management Failures

    FCA and PRA in the UK, FED in the US, and the authorities in Singapore have fined Goldman Sachs for risk management failures in connection with the 1Malaysia Development Berhad (1MDB).

    October 23, 2020 WebPage Regulatory News
    News

    Canada Hosts International Conference of Banking Supervisors

    BCBS announced that OSFI and the Bank of Canada hosted the 21st International Conference of Banking Supervisors (ICBS) virtually on October 19-22, 2020.

    October 22, 2020 WebPage Regulatory News
    News

    FCA Proposes More Measures to Help Insurance Customers Amid Crisis

    FCA proposed guidance on how firms should continue to seek to help customers who hold insurance and premium finance products and may be in financial difficulty because of COVID-19, after October 31, 2020.

    October 21, 2020 WebPage Regulatory News
    News

    EBA Issues Opinion to Address Risk Stemming from Legacy Instruments

    EBA issued an opinion on prudential treatment of the legacy instruments as the grandfathering period nears an end on December 31, 2021.

    October 21, 2020 WebPage Regulatory News
    News

    ESRB Publishes Non-Bank Financial Intermediation Risk Monitor for 2020

    ESRB published the fifth issue of the EU Non-bank Financial Intermediation Risk Monitor 2020 (NBFI Monitor).

    October 21, 2020 WebPage Regulatory News
    News

    HM Treasury Publishes Policy Statement Amending Benchmarks Regulation

    HM Treasury announced that the new Financial Services Bill has been introduced in the Parliament.

    October 21, 2020 WebPage Regulatory News
    News

    APRA Initiates Action Against a Bank for Liquidity Compliance Breach

    APRA announced that it has increased the minimum liquidity requirement of Bendigo and Adelaide Bank for failing to comply with the prudential standard on liquidity.

    October 21, 2020 WebPage Regulatory News
    News

    PRA Consults on Implementation of Certain Provisions of CRD5 and CRR2

    PRA published the consultation paper CP17/20 to propose changes to certain rules, supervisory statements, and statements of policy to implement elements of the Capital Requirements Directive (CRD5).

    October 20, 2020 WebPage Regulatory News
    News

    US Agencies Finalize Rule to Reduce Impact of Large Bank Failures

    US Agencies adopted a final rule that applies to advanced approaches banking organizations and aims to reduce interconnectedness in the financial system as well as to reduce contagion risks associated with the failure of a global systemically important bank (G-SIB).

    October 20, 2020 WebPage Regulatory News
    News

    US Agencies Finalize Rule on Net Stable Funding Ratio Requirements

    US Agencies (FDIC, FED, and OCC) adopted a final rule that implements the net stable funding ratio (NSFR) for certain large banking organizations.

    October 20, 2020 WebPage Regulatory News
    RESULTS 1 - 10 OF 6004