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
Metin Epözdemir
Metin Epözdemir helps European and African banks with design and implementation of credit risk, stress testing, capital management, and credit loss accounting solutions.
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
Related Articles
ESAs Issue Multiple Regulatory Updates for Financial Sector Entities
The three European Supervisory Authorities (ESAs) issued a letter to inform about delay in the Sustainable Finance Disclosure Regulation (SFDR) mandate, along with a Call for Evidence on greenwashing practices.
ISSB Makes Announcements at COP27; IASB to Propose IFRS 9 Amendments
The International Sustainability Standards Board (ISSB) of the IFRS Foundations made several announcements at COP27 and with respect to its work on the sustainability standards.
IOSCO Prioritizes Green Disclosures, Greenwashing, and Carbon Markets
The International Organization for Securities Commissions (IOSCO), at COP27, outlined the regulatory priorities for sustainability disclosures, mitigation of greenwashing, and promotion of integrity in carbon markets.
EBA Finalizes Methodology for Stress Tests, Issues Other Updates
The European Banking Authority (EBA) issued a statement in the context of COP27, clarified the operationalization of intermediate EU parent undertakings (IPUs) of third-country groups
OSFI Sets Out Work Priorities and Reporting Updates for Banks
The Office of the Superintendent of Financial Institutions (OSFI) published an annual report on its activities, a report on forward-looking work.
APRA Finalizes Changes to Capital Framework, Issues Other Updates
The Australian Prudential Regulation Authority (APRA) finalized amendments to the capital framework, announced a review of the prudential framework for groups.
BIS Hub and Central Banks Conduct CBDC and DeFI Pilots
The Bank for International Settlements (BIS) Innovation Hubs and several central banks are working together on various central bank digital currency (CBDC) pilots.
ECB Sets Deadline for Banks to Meet Its Climate Risk Expectations
The European Central Bank (ECB) published the results of its thematic review, which shows that banks are still far from adequately managing climate and environmental risks.
ESAs, ECB, & EC Issue Multiple Regulatory Updates for Financial Sector
Among its recent publications, the European Banking Authority (EBA) published the final standards and guidelines on interest rate risk arising from non-trading book activities (IRRBB)
EC Adopts Final Rules Under CRR, BRRD, and Crowdfunding Regulation
The European Commission (EC) recently adopted regulations with respect to the calculation of own funds requirements for market risk, the prudential treatment of global systemically important institutions (G-SIIs)
