The option for financial institutions and firms to phase in over a three-year period the day-one regulatory capital effects of the “current expected credit losses” (CECL) accounting methodology became official today as the three federal banking agencies issued joint press releases announcing their regulatory approval of the change.
The Federal Reserve, Federal Deposit Insurance Corp. (FDIC), and the Office of the Comptroller of the Currency (OCC), in joint releases also noted that their final rule also revises their other regulations to reflect the update to the accounting standards.
The final rule, the agencies noted, takes effect April 1 of next year. However, banking organizations that choose to early adopt CECL may elect to adopt the rule as of the first quarter 2019 – less than two weeks away.
The CECL accounting standard was adopted by the Financial Accounting Standards Board (FASB) in June 2016. It replaces existing “incurred loss” methodology for certain financial assets.