Featured Product

    US Agencies Issue Policy Statement on Allowance for Credit Losses

    May 08, 2020

    US Agencies (FDIC, FED, NCUA, and OCC) issued a policy statement on allowance for credit losses and a guidance on credit risk review systems. The policy statement on credit loss allowances describes the measurement of expected credit losses using the current expected credit losses (CECL) methodology and updates the concepts and practices detailed in the existing supervisory guidance that remain applicable. The guidance on credit risk review systems discusses sound management of credit risk; a system of independent, ongoing credit review; and appropriate communication about the performance of the loan portfolio of an institution to its management and board of directors.

    The final 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. It describes the CECL methodology for determining allowances for credit losses that are applicable to loans held-for-investment, net investments in leases, and held-to-maturity debt securities accounted for at amortized cost. It also describes the estimation of the allowances for credit losses for an available-for-sale debt security in accordance with the Subtopic 326-30. The final policy statement becomes applicable to an institution upon the adoption of Topic 326 by than institution. After the Topic 326 becomes effective for all institutions, the agencies will rescind the Allowance for Loan and Lease Losses policy statements. 

    The final guidance on credit risk review systems outlines principles that an institution should consider when developing and maintaining an effective credit risk review system. It also describes a broad set of practices that can be used either within a dedicated unit or across multiple units throughout an institution to form a credit risk review system that is consistent with the safe and sound lending practices. The guidance is relevant to all institutions supervised by the agencies and aligns with the Interagency Guidelines Establishing Standards for Safety and Soundness; the interagency guidelines set out safety and soundness standards for insured depository institutions to establish a system for independent, ongoing credit risk review, including regular communication to its management and board of directors. The agencies have adopted the guidance on credit risk review systems post certain revisions to the proposed guidance from October 2019. The final guidance is intended to be flexible and consistent with CECL, but it does not incorporate the FASB Topic 326.


    Related Links

    Keywords: Americas, US, Banking, Accounting, Credit Risk, CECL, IFRS 9, Credit Losses Standard, Topic 326, ALLL, US Agencies

    Featured Experts
    Related Articles

    EBA Clarifies Use of COVID-19-Impacted Data for IRB Credit Risk Models

    The European Banking Authority (EBA) published four draft principles to support supervisory efforts in assessing the representativeness of COVID-19-impacted data for banks using the internal ratings based (IRB) credit risk models.

    June 21, 2022 WebPage Regulatory News

    BIS Hub Updates Work Program for 2022, Announces New Projects

    The Bank for International Settlements (BIS) Innovation Hub updated its work program, announcing a set of projects across various centers.

    June 17, 2022 WebPage Regulatory News

    US Senate Members Seek Details on SEC Proposed Climate Disclosure Rule

    Certain members of the U.S. Senate Committee on Banking, Housing, and Urban Affairs issued a letter to the Securities and Exchange Commission (SEC)

    June 16, 2022 WebPage Regulatory News

    EIOPA Consults on Review of Securitization Framework in Solvency II

    The European Insurance and Occupational Pensions Authority (EIOPA) published a consultation paper on the advice on the review of the securitization prudential framework in Solvency II.

    June 16, 2022 WebPage Regulatory News

    UK Authorities Issue Regulatory and Reporting Updates for Banks

    The Prudential Regulation Authority (PRA) issued a statement on PRA buffer adjustment while the Bank of England (BoE) published a notice on the statistical reporting requirements for banks.

    June 15, 2022 WebPage Regulatory News

    BaFin Consults on Resolvability Requirements for Resolution Planning

    The Federal Financial Supervisory Authority of Germany (BaFin) proposed to amend the “Capital Investment Conduct And Organization Ordinance” and issued a draft circular on the minimum resolvability requirements for resolution planning.

    June 10, 2022 WebPage Regulatory News

    EBA Consults on Certain Standards and Guidelines Under CRR and BRRD

    The European Banking Authority (EBA) proposed guidelines, for the resolution authorities, on the publication of the write-down and conversion and bail-in exchange mechanic, with the comment period ending on September 07, 2022.

    June 08, 2022 WebPage Regulatory News

    OJK Publishes Regulatory Updates for Financial Sector Entities

    The Financial Services Authority of Indonesia (OJK) is strengthening cooperation with the Australian Prudential Regulation Authority (APRA) and the Japanese Financial Services Agency (JFSA)

    June 03, 2022 WebPage Regulatory News

    EU Publishes Rules on DLT and Data Governance

    The European Parliament and the Council published Regulation 2022/868 on European data governance (Data Governance Act).

    June 03, 2022 WebPage Regulatory News

    EBA Publishes Phase 2 of Reporting Framework 3.2

    The European Banking Authority (EBA) published phase 2 of its reporting framework 3.2. The technical package supports the implementation of the updated reporting framework by providing standard specifications

    June 03, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8267