December 21, 2018
Federal Reserve Board will maintain current modeling framework for loan allowances in its supervisory stress test through 2021
For release at 1:30 p.m. EST
The Federal Reserve Board announced on Friday that it will maintain the current modeling framework for loan allowances in its supervisory stress test through 2021.
In June 2016, the Financial Accounting Standards Board issued a new accounting standard for credit losses known as the Current Expected Credit Losses (CECL) methodology. The Board and other banking agencies have given firms the option to phase in the initial effects of CECL on regulatory capital over three years. During the phase-in, the agencies will continue to monitor the impact of CECL adoption.
For purposes of the Board's supervisory stress test--the Comprehensive Capital Analysis and Review (CCAR)--the Board will not alter its current modeling framework, as it relates to CECL, for the 2019, 2020 and 2021 cycles. The Board intends to evaluate appropriate future enhancements to the current framework as best practices for implementing CECL are developed.
Bank holding companies required to perform company-run stress tests as part of CCAR will be required to incorporate CECL into those stress tests starting in the 2020 cycle. However, the Board will not issue supervisory findings on those firms' allowance estimations in the CCAR exercise through 2021.
The statement from the Board contains additional information.
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