Nearly a month after they were finalized, a policy statement on credit losses accounting (under the current expected credit losses, or CECL, accounting standard) and guidance on credit risk review systems are both scheduled to be available publicly Monday, after they are published in the Federal Register.
The three federal banking agencies and the National Credit Union Administration (NCUA) approved the final policy statement and guidance May 8. The two items were proposed in October by the agencies. The items address the interpretation and application of the accounting industry standard for the treatment of credit losses under the CECL standard, issued by the Financial Accounting Standards Board (FASB).
The interagency statement on credit losses accounting is intended to “promote consistency in the interpretation and application of the Financial Accounting Standards Board’s credit losses accounting standard, which introduces the current expected credit losses (CECL) methodology,” the agencies said earlier this month in issuing the final.
The statement becomes effective at the time of each institution’s adoption of the credit losses accounting standard, they said.
The policy statement describes the measurement of expected credit losses using the CECL methodology and updates concepts and practices detailed in existing supervisory guidance that remain applicable.
The final guidance on credit risk review systems, also revised “with targeted changes and clarifications,” replaces Attachment 1 of the 2006 Interagency Policy Statement on the Allowance for Loan and Lease Losses. It discusses sound management of credit risk; a system of independent, ongoing credit review; and appropriate communication regarding the performance of the institution’s loan portfolio to its management and board of directors.