Financial Institution Letter
FIL-59-2019
October 17, 2019
Proposed Interagency Policy Statement on Allowances for Credit Losses
Summary: The federal financial institution regulatory agencies have issued for public comment the attached
proposed Interagency Policy Statement on Allowances for Credit Losses in response to changes in the
accounting for credit losses under U.S. generally accepted accounting principles (U.S. GAAP), as promulgated
by the Financial Accounting Standards Board (FASB). Institutions are encouraged to review the proposed
interagency policy statement and submit comments by December 16, 2019.
Statement of Applicability to Institutions With Total Assets Under $1 Billion: This Financial Institution
Letter applies to all FDIC-supervised institutions.
Distribution:
FDIC-Supervised Institutions
Highlights:
• In June 2016, the FASB issued Accounting Standards Update
No. 2016-13, which introduces the current expected credit
losses (CECL) methodology and replaces the existing incurred
loss methodology in U.S. GAAP. The FASB has codified these
changes, including subsequent amendments, in Accounting
Standards Codification Topic 326, Financial Instruments –
Credit Losses (FASB ASC Topic 326).
• The proposed interagency policy statement:
o Describes the CECL methodology for determining
allowances for credit losses (ACLs) on financial assets
measured at amortized cost (including loans held for
investment and held-to-maturity debt securities), net
investments in leases, and certain off-balance-sheet credit
exposures in accordance with FASB ASC Subtopic 326-20.
o Describes the estimation of an ACL for an impaired
available-for-sale debt security in accordance with FASB
ASC Subtopic 326-30.
o Includes and updates concepts and practices detailed in the
existing December 2006 Interagency Policy Statement on
the Allowance for Loan and Lease Losses (2006 allowance
policy statement) and July 2001 Policy Statement on
Allowance for Loan and Lease Losses Methodologies and
Documentation for Banks and Savings Institutions that
remain relevant under FASB ASC Topic 326.
• The principles described in the proposed policy statement are
consistent with U.S. GAAP, applicable regulatory reporting
requirements, safe and sound banking practices, and the
agencies’ codified guidelines establishing standards for safety
and soundness.
• An attachment to the 2006 allowance policy statement on loan
review systems is being updated as part of a separate proposal.
• The proposed policy statement would be effective at the time of
each institution’s adoption of FASB ASC Topic 326.
Suggested Routing:
Chief Executive Officer
Chief Financial Officer
Chief Credit Officer
Board of Directors
Related Topics:
FIL-20-2019, April 3, 2019, New Accounting
Standard on Credit Losses: Frequently Asked
Questions
FIL-39-2016, June 17, 2016, Joint Statement on
the New Accounting Standard on Financial
Instruments – Credit Losses
Attachment:
Proposed Interagency Policy Statement on
Allowances for Credit Losses
Contact:
Shannon Beattie, Chief, Accounting and Securities
Disclosure Section, (202) 898-3952 or
sbeattie@fdic.gov
John Rieger, Deputy Chief Accountant, (202) 898-
3602 or jrieger@fdic.gov
Andrew Overton, Examination Specialist,
(202) 898-8922 or aoverton@fdic.gov
Note:
Access FDIC Financial Institution Letters (FILs) on
the FDIC's website.
Subscribe to receive FILs electronically.
Paper copies may be obtained via the FDIC's
Public Information Center, 3501 Fairfax Drive,
E-1002, Arlington, VA 22226 (877-275-3342 or
703-562-2200).
Federal Deposit Insurance Corporation
550 17th Street, NW, Washington, D.C. 20429-9990
FIL-59-2019
October 17, 2019
Proposed Interagency Policy Statement on Allowances for Credit Losses
Summary: The federal financial institution regulatory agencies have issued for public comment the attached
proposed Interagency Policy Statement on Allowances for Credit Losses in response to changes in the
accounting for credit losses under U.S. generally accepted accounting principles (U.S. GAAP), as promulgated
by the Financial Accounting Standards Board (FASB). Institutions are encouraged to review the proposed
interagency policy statement and submit comments by December 16, 2019.
Statement of Applicability to Institutions With Total Assets Under $1 Billion: This Financial Institution
Letter applies to all FDIC-supervised institutions.
Distribution:
FDIC-Supervised Institutions
Highlights:
• In June 2016, the FASB issued Accounting Standards Update
No. 2016-13, which introduces the current expected credit
losses (CECL) methodology and replaces the existing incurred
loss methodology in U.S. GAAP. The FASB has codified these
changes, including subsequent amendments, in Accounting
Standards Codification Topic 326, Financial Instruments –
Credit Losses (FASB ASC Topic 326).
• The proposed interagency policy statement:
o Describes the CECL methodology for determining
allowances for credit losses (ACLs) on financial assets
measured at amortized cost (including loans held for
investment and held-to-maturity debt securities), net
investments in leases, and certain off-balance-sheet credit
exposures in accordance with FASB ASC Subtopic 326-20.
o Describes the estimation of an ACL for an impaired
available-for-sale debt security in accordance with FASB
ASC Subtopic 326-30.
o Includes and updates concepts and practices detailed in the
existing December 2006 Interagency Policy Statement on
the Allowance for Loan and Lease Losses (2006 allowance
policy statement) and July 2001 Policy Statement on
Allowance for Loan and Lease Losses Methodologies and
Documentation for Banks and Savings Institutions that
remain relevant under FASB ASC Topic 326.
• The principles described in the proposed policy statement are
consistent with U.S. GAAP, applicable regulatory reporting
requirements, safe and sound banking practices, and the
agencies’ codified guidelines establishing standards for safety
and soundness.
• An attachment to the 2006 allowance policy statement on loan
review systems is being updated as part of a separate proposal.
• The proposed policy statement would be effective at the time of
each institution’s adoption of FASB ASC Topic 326.
Suggested Routing:
Chief Executive Officer
Chief Financial Officer
Chief Credit Officer
Board of Directors
Related Topics:
FIL-20-2019, April 3, 2019, New Accounting
Standard on Credit Losses: Frequently Asked
Questions
FIL-39-2016, June 17, 2016, Joint Statement on
the New Accounting Standard on Financial
Instruments – Credit Losses
Attachment:
Proposed Interagency Policy Statement on
Allowances for Credit Losses
Contact:
Shannon Beattie, Chief, Accounting and Securities
Disclosure Section, (202) 898-3952 or
sbeattie@fdic.gov
John Rieger, Deputy Chief Accountant, (202) 898-
3602 or jrieger@fdic.gov
Andrew Overton, Examination Specialist,
(202) 898-8922 or aoverton@fdic.gov
Note:
Access FDIC Financial Institution Letters (FILs) on
the FDIC's website.
Subscribe to receive FILs electronically.
Paper copies may be obtained via the FDIC's
Public Information Center, 3501 Fairfax Drive,
E-1002, Arlington, VA 22226 (877-275-3342 or
703-562-2200).
Federal Deposit Insurance Corporation
550 17th Street, NW, Washington, D.C. 20429-9990