Banking agencies’ reg capital rule changes for CECL delayed to July 1

The three federal banking regulators are delaying the April 1 effective date of a regulatory capital rule that addresses the current-expected-credit-loss (CECL) accounting standard until July 1, the agencies said in a notice scheduled for publication Friday in the Federal Register.

The delay is related to the late publication of the final rule due to the partial federal government shutdown. Banking organizations still may early adopt this final rule prior to the new effective date, according to the notice issued jointly by the Federal Reserve Board, the Federal Deposit Insurance Corp. (FDIC), and the Office of the Comptroller of the Currency (OCC).

The final rule was published Feb. 14 in the Federal Register. It revises the agencies’ capital rule to address changes to credit loss accounting under generally accepted accounting principles, including banking organizations’ implementation of the current expected credit losses methodology (CECL) approved by the Financial Accounting Standards Board (FASB).

The final rule provides banking organizations the option to phase in over a three-year period the day-one adverse effects on regulatory capital that may result from the adoption of the new accounting standard. It also revises the agencies’ regulatory capital rule, stress testing rules, and regulatory disclosure requirements to reflect CECL, and it makes conforming amendments to other regulations that reference credit loss allowances.

The agencies submitted the final rule for publication in December 2018, and the April 1 effective date satisfied statutory requirements. But since it didn’t publish in the Federal Register until Feb. 14, the regulators are delaying it to provide a sufficient review period under the Congressional Review Act and to satisfy the requirements of the Small Business Regulatory Enforcement Fairness Act of 1996, Riegle Community Development and Regulatory Improvement Act, and Administrative Procedure Act.

Reg lookup: Regulatory Capital Rule: Implementation and Transition of the Current Expected Credit Losses Methodology for Allowances and Related Adjustments to the Regulatory Capital Rule and Conforming Amendments to Other Regulations