FASB to Review Credit Loss Standard Alternative for Regional Banks

March 4, 2019

In response to requests for a different method for calculating loan losses under Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, the Financial Accounting Standards Board (“FASB”) plans to determine whether to undertake a limited-scope standard-setting project for regional banks. At the board’s April 3 meeting, FASB staff will present its research on the proposed alternative approach. Board members will take up the issue, reject the alternative, or conduct more research.

The decision to discuss the alternative comes after a November 2018 letter from over 20 regional banks asking the FASB to consider an alternative. During a January roundtable, banks clashed over changing a key part of the FASB’s credit losses proposal. Some regional banks believe ASU No. 2016-13 will cause volatility in their regulatory capital and curb their lending abilities during an economic downturn.