Final rule implementing CECL for banks highlighted in OCC bulletin

Key points of a final rule, issued Feb. 14, by banking agencies to implement the new accounting standard for current expected credit losses (CECL) are highlighted in a bulletin issued Monday by the federal agency that charters and supervises national banks and federal savings associations (FSAs).

In Bulletin 2019-10, the Office of the Comptroller of the Currency (OCC) notes that the final rule conforms definitions in the capital and non-capital rules of the agencies – including the OCC, Federal Reserve Board, and Federal Deposit Insurance Corp. (FDIC) – to the the Financial Accounting Standards Board’s (FASB) Accounting Standards Update (ASU) 2016-13, “Financial Instruments—Credit Losses.” The rule also provides an optional regulatory capital transition for banks that experience a decrease in capital as a result of adopting the CECL standard, the bulletin notes.

The final rule also, according to the bulletin:

  • updates references in the agencies’ risk-based capital rules to conform with the new terminology used in ASU 2016-13.
  • updates references to allowances in the OCC’s non-capital regulations to conform with the new terminology used in ASU 2016-13.
  • provides an option to elect a three-year regulatory capital transition under the risk-based capital rules for banks that experience a capital decrease as a result of implementing ASU 2016-13.

OCC Bulletin 2019-10