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    FED Proposes to Incorporate CECL Methodology Revisions into FR Y-14

    FED invites comment on a proposal to extend for three years, with revision, the Capital Assessments and Stress Testing Reports (FR Y-14A/Q/M; OMB No. 7100-0341). The focus of revisions is on incorporating the Current Expected Credit Loss (CECL) methodology revisions into the FR Y-14A/Q/M reports. Comments must be submitted on or before September 30, 2019. The collections of information are applicable to top-tier bank holding companies with total consolidated assets of USD 100 billion or more and U.S. intermediate holding companies with USD 50 billion or more in assets that are subsidiaries of foreign banking organizations. Additionally, FED has published draft forms and instructions, along with the draft OMB supporting statement, for FR Y-14A/Q/M.

    FED is proposing to address the revised accounting for credit losses under the FASB Accounting Standards Update (ASU) No. 2016-13, titled Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, by implementing the current expected credit loss (CECL) accounting methodology across all of the FR Y-14 reports. These revisions would broaden the scope of the financial assets for which an allowance for credit losses assessment must be established and maintained, along with the elimination of the existing model for purchased credit-impaired (PCI) assets. The proposed changes to FR Y-14 reports mirror the related changes to the Consolidated Financial Statements for Holding Companies (FR Y-9C) for CECL, as appropriate. The proposed reporting changes related to CECL are consistent with the revisions indicated in the final CECL rule. 

    Generally, institutions subject to filing the FR Y-14 reports would reflect the standard in data reported on FR Y-14A, FR Y-14Q, and FR Y-14M, with as-of dates following the start of the firm's fiscal year and the adoption of the standard, beginning with the FR Y-14 reports as-of December 31, 2019. Certain items, as described in the Collection of Supplemental CECL Information section, may require balances to be reported as of December 31 prior to CECL adoption. Firms should refer to the final CECL rule for specifics surrounding the inclusion of credit losses in a given stress test cycle. The proposed changes to FR Y-14 are designed to accommodate the differences in implementation dates for different firms. Specifically, although new items would be added to the report form and instructions, the proposed revisions to schedule titles or specific data item captions resulting from the change in nomenclature on the adoption of CECL would not be reflected in the FR Y-14 report forms until full adoption by all FR Y-14 filers, or March 31, 2022, at the latest.

    With the reports as-of March 31, 2022, the FR Y-14 reporting forms and instructions for each impacted schedule title or data item would be updated to fully incorporate CECL nomenclature and reporting. This would include, unless otherwise indicated, revising the schedule titles or specific data item captions referencing the “provision for loan and lease losses” and the “allowance for loan and lease losses” to be changed to the “provision for credit losses” and the “allowance for credit losses,” respectively. Items where the FR Y-14 instructions state “to report as defined in the FR Y-9C” (that is, there is no deviation from FR Y-9C item definition) should always conform with the reporting as defined on the FR Y-9C, unless otherwise noted. This includes as it pertains to reporting under ASU 2016-13 on the FR Y-14 after the proposed implementation date in December 31, 2019.

     

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    Comment Due Date: September 30, 2019

    Keywords: Americas, US, Banking, Stress Testing, FR Y-14, CECL, Dodd-Frank Act, DFAST, CCAR, Reporting, Supporting Statement, Financial Instruments, IFRS 9, FED

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