FDIC Chair Urges FASB to Delay Certain CECL Rules Amid Pandemic
The FDIC Chair Jelena McWilliams wrote a letter to FASB urging a delay in transitions to, and exclusions from, certain accounting rules. She suggests exclusion of COVID-19-related modifications from being considered a concession when determining a troubled debt restructuring classification and granting financial institutions that are subject to the current expected credit losses (CECL) methodology an option to postpone implementation of CECL, given the current economic environment. For the country's community banks, she also suggested imposing a moratorium on the effective date for the institutions that are not currently required to implement CECL to allow these financial institutions to focus on immediate business challenges relating to the impact of the current pandemic and its effect on the financial system.
In view of the ongoing unprecedented challenges resulting from COVID-19, FDIC is concerned that the scheduled introduction of recently enacted accounting standards may strain the ability of financial institutions to serve their depositors and prudently meet the credit needs of their communities. Institutions will face unique difficulties, over the coming weeks and months, to adequately staff customer-facing functions; ensure that deposit, loan, and IT systems operate normally; help borrowers that are experiencing unanticipated cash flow difficulties; and address the earnings and capital implications of near zero percent interest rates; and a potential surge in borrowers who are unable to meet contractual payment terms. In her letter, she encouraged "FASB to take these much needed actions to allow banks to help their communities at this time of need."
Related Links
Keywords: Americas, US, Accounting, Banking, CECL, IFRS 9, Troubled Debt Restructuring, NPLs, COVID 19, FASB, FDIC
Featured Experts
Scott Dietz
Scott is a Director in the Regulatory and Accounting Solutions team responsible for providing accounting expertise across solutions, products, and services offered by Moody’s Analytics in the US. He has over 15 years of experience leading auditing, consulting and accounting policy initiatives for financial institutions.
Masha Muzyka
CECL, IFRS 9, and IFRS 17 expert; credit risk and insurance risk specialist; strategic planning and credit analytics solutions consultant
Anna Krayn
CECL adoption expert; engagement manager for loss estimation, internal risk capability enhancement, and counterparty credit risk management
Previous Article
IAIS Issues Level 2 Document for ICS Version 2.0Related Articles
EBA Finalizes Templates for One-Off Climate Risk Scenario Analysis
The European Banking Authority (EBA) has published the final templates, and the associated guidance, for collecting climate-related data for the one-off Fit-for-55 climate risk scenario analysis.
EBA Mulls Inclusion of Environmental & Social Risks to Pillar 1 Rules
The European Banking Authority (EBA) recently published a report that recommends enhancements to the Pillar 1 framework, under the prudential rules, to capture environmental and social risks.
BCBS Consults on Disclosure of Crypto-Asset Exposures of Banks
As a follow on from its prudential standard on the treatment of crypto-asset exposures, the Basel Committee on Banking Supervision (BCBS) proposed disclosure requirements for crypto-asset exposures of banks.
BCBS and EBA Publish Results of Basel III Monitoring Exercise
The Basel Committee on Banking Supervision (BCBS) and the European Banking Authority (EBA) have published results of the Basel III monitoring exercise.
PRA Updates Timeline for Final Basel III Rules, Issues Other Updates
The Prudential Regulation Authority (PRA) recently issued a few regulatory updates for banks, with the updated Basel implementation timelines being the key among them.
US Treasury Sets Out Principles for Net-Zero Financing
The U.S. Department of the Treasury has recently set out the principles for net-zero financing and investment.
EC Launches Survey on G7 Principles on Generative AI
The European Commission (EC) launched a stakeholder survey on the draft International Guiding Principles for organizations developing advanced artificial intelligence (AI) systems.
ISSB Sustainability Standards Expected to Become Global Baseline
The finalization of the two sustainability disclosure standards—IFRS S1 and IFRS S2—is expected to be a significant step forward in the harmonization of sustainability disclosures worldwide.
IOSCO, BIS, and FSB to Intensify Focus on Decentralized Finance
Decentralized finance (DeFi) is expected to increase in prominence, finding traction in use cases such as lending, trading, and investing, without the intermediation of traditional financial institutions.
BCBS Assesses NSFR and Large Exposures Rules in US
The Basel Committee on Banking Supervision (BCBS) published reports that assessed the overall implementation of the net stable funding ratio (NSFR) and the large exposures rules in the U.S.
