Amended Capital Rule for FASB Credit Loss Standard Proposed

April 30, 2018

The Federal Reserve, Office of the Comptroller of the Currency, and Federal Deposit Insurance Corporation have proposed amending regulatory capital rules to improve consistency among bank regulation and the Financial Accounting Standards Board’s credit loss standard.

Issued as Regulatory Capital Rules: Implementation and Transition of the Current Expected Credit Losses Methodology for Allowances and Related Adjustments to the Regulatory Capital Rules and Conforming Amendments to Other Regulations, the proposal would give banks the choice to phase-in the capital impacts of implementing Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. Since the banking agencies propose a three-year phase-in period, banks would have at minimum four years to prepare for implementation. The banking regulators noted that the proposal would also modify the regulatory capital rules to recognize which credit loss allowances under ASU No. 2016-13 can be considered as regulatory capital.

Comments on the proposal are due 60 days its publication in the Federal Register.