OCC Issues Booklet on Allowances for Credit Losses
OCC issued the new “Allowances for Credit Losses” booklet as part of the Comptroller’s Handbook. The booklet provides OCC examiners with information and examination procedures on allowances for credit losses. The booklet describes the scope of the current expected credit losses (CECL) methodology, risks associated with allowances for credit losses, and seven primary components used to estimate allowances for credit losses.
The booklet discusses documentation and considerations for the following:
- Expected credit losses
- Estimation processes (including validation of and internal controls over these processes)
- Maintenance of appropriate allowances for credit losses
- Responsibilities of boards of directors and management
- Examiner reviews of allowances for credit losses
This booklet applies to the OCC’s supervision of banks that have adopted the CECL methodology under Accounting Standards Codification Topic 326. Most community banks will not adopt the CECL methodology until 2023. The “Allowance for Loan and Lease Losses” booklet of the Comptroller’s Handbook continues to apply to the OCC’s supervision of banks that have not adopted CECL. The booklet is consistent with the “Interagency Policy Statement on Allowances for Credit Losses” conveyed by OCC Bulletin 2020-49 and the “Frequently Asked Questions on the New Accounting Standard on Financial Instruments—Credit Losses” conveyed by OCC Bulletin 2019-17.
Related Links
Keywords: Americas, US, Banking, CECL, Credit Risk, Credit Losses Standard, Topic 326, Comptroller Handbook, OCC
Featured Experts
Jun Chen
A well-recognized researcher in the field; offers many years of experience in the real estate finance industry, and leads research efforts in expanding credit risk analytics to commercial real estate.
Cristian deRitis
Leading economist; recognized authority and commentator on personal finance and credit, U.S. housing, economic trends and policy implications; innovator in econometric and credit modeling techniques.
Anna Krayn
CECL adoption expert; engagement manager for loss estimation, internal risk capability enhancement, and counterparty credit risk management
Previous Article
HKMA Consults to Update Providers List Under OTC Derivatives RegimeRelated Articles
OSFI Finalizes on Climate Risk Guideline, Issues Other Updates
The Office of the Superintendent of Financial Institutions (OSFI) is seeking comments, until May 31, 2023, on the draft guideline on culture and behavior risk, with final guideline expected by the end of 2023.
BIS Paper Examines Impact of Greenhouse Gas Emissions on Lending
BIS issued a paper that investigates the effect of the greenhouse gas, or GHG, emissions of firms on bank loans using bank–firm matched data of Japanese listed firms from 2006 to 2018.
HMT Mulls Alignment of Ring-Fencing and Resolution Regimes for Banks
The HM Treasury (HMT) is seeking evidence, until May 07, 2023, on practicalities of aligning the ring-fencing and the banking resolution regimes for banks.
BCBS Report Examines Impact of Basel III Framework for Banks
The Basel Committee on Banking Supervision (BCBS) published results of the Basel III monitoring exercise based on the June 30, 2022 data.
PRA Consults on Prudential Rules for "Simpler-Regime" Firms
Among the recent regulatory updates from UK authorities, a key development is the first-phase consultation, from the Prudential Regulation Authority (PRA), on simplifications to the prudential framework that would apply to the simpler-regime firms.
DNB Publishes Multiple Reporting Updates for Banks
DNB, the central bank of Netherlands, updated the list of additional reporting requests and published additional data quality checks and XBRL-Formula linkbase documents for the first quarter of 2023.
NBB Sets Out Climate Risk Expectations, Issues Reporting Updates
The National Bank of Belgium (NBB) published a communication on climate-related and environmental risks, issued an update on XBRL reporting
EBA Updates Address Securitization Standards and DGS Guidelines
The European Banking Authority (EBA) published the final draft of the regulatory technical standards that set out conditions for assessment of homogeneity of the underlying exposures in simple, transparent, and standardized (STS) securitizations.
FSB Publishes Letter to G20, Sets Out Work Priorities for 2023
The Financial Stability Board (FSB) published a letter intended for the G20 Finance Ministers and Central Bank Governors, highlighting the work that FSB will take forward under the Indian G20 Presidency in 2023
ISSB Standards May Become Effective from January 2024
The International Organization of Securities Commissions (IOSCO) welcomed the confirmation statement by the International Sustainability Standards Board (ISSB) setting out its progress in the development of its first sustainability-related corporate disclosure standards.
