Supervision and Regulation Letters

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SR 19-8:

Frequently Asked Questions on the Current Expected Credit Losses Methodology (CECL)

BOARD OF GOVERNORS
OF THE FEDERAL RESERVE SYSTEM
WASHINGTON, D.C. 20551

DIVISION OF
SUPERVISION AND REGULATION

SR 19-8
April 3, 2019
Revised July 31, 2020
Attachment Reposted July 31, 2020

In November 2019, the FASB issued ASU No. 2019-10, Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842):  Effective Dates. This ASU delayed the effective date of Topic 326 to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, for all institutions, except U.S. Securities and Exchange Commission (SEC) filers, as that term is defined in U.S. GAAP that are not eligible to be smaller reporting companies as defined by the SEC. The responses in the attachment to this letter have not yet been updated. Institutions should consider this delayed effective date when reviewing responses to questions 3, 4, 28, and 34 through 36 in the attachment.

TO THE OFFICER IN CHARGE OF SUPERVISION AT EACH FEDERAL RESERVE BANK

SUBJECT:

Frequently Asked Questions on the Current Expected Credit Losses Methodology (CECL)

Applicability: This guidance applies to all Federal Reserve supervised financial institutions,1 including those with $10 billion or less in consolidated assets, that file regulatory reports prepared in accordance with generally accepted accounting principles (GAAP).2

The Federal Reserve, the Federal Deposit Insurance Corporation, the National Credit Union Administration, and the Office of the Comptroller of the Currency (the agencies) are issuing additional frequently asked questions (FAQs)3 to aid institutions in their implementation of the new accounting standard for credit losses recently issued by the Financial Accounting Standards Board (FASB).4 These FAQs expand upon the agencies' June 2016 Joint Statement on the New Accounting Standard on Financial Instruments – Credit Losses.5 This letter announces the new FAQs numbered 38 through 46 and the revision of several previously issued FAQs. The attachment to this letter includes all FAQs issued to date, including the 2016 and 2017 FAQs.6

Reserve Banks are asked to distribute this letter to the supervised institutions in their districts, as well as to appropriate supervisory and examination staff. Questions regarding this letter should be directed to the following staff in the Board's Accounting Policy section: Lara Lylozian, Manager, at (202) 475-6656; and Kevin Chiu, Accounting Policy Analyst, at (202) 912-4608. In addition, questions may be sent via the Board's public website.7

signed by
Michael S. Gibson
Director
Division of
Supervision and Regulation

Supersedes:
  • SR letter 17-8, “Frequently Asked Questions on the Current Expected Credit Losses Methodology (CECL)” 
Attachments:
Cross References:
  • SR letter 16-12, “Interagency Guidance on the New Accounting Standard on Financial Instruments – Credit Losses”
  • SR letter 13-19 / CA letter 13-21, “Guidance on Managing Outsourcing Risk”
  • SR letter 11-7, “Guidance on Model Risk Management”
  • SR letter 10-16, “Interagency Appraisal and Evaluation Guidelines”
  • SR letter 06-17, “Interagency Policy Statement on the Allowance for Loan and Lease Losses (ALLL)”
  • SR letter 01-17, “Final Interagency Policy Statement on Allowance for Loan and Lease Losses (ALLL) Methodologies and Documentation for Banks and Savings Institutions”
  • SR letter 95-42, “Allowance for Loan and Lease Losses for U.S. Branches and Agencies of Foreign Banking Organizations”
  • SR letter 95-4, “Allowance for Loan and Lease Losses for U.S. Branches and Agencies of Foreign Banking Organizations”
Notes:

1. This includes state member banks, bank holding companies, savings and loan holding companies, Edge Act and agreement corporations, and U.S. branches and agencies of foreign banking organizations (FBOs). Return to text

2. U.S. branches and agencies of FBOs may choose to, but are not required to, maintain an allowance for loan losses on an office level. These institutions should refer to the instructions for the FFIEC 002, "Report of Assets and Liabilities of U.S. Branches and Agencies of Foreign Banks," as well as SR letter 95-4, "Allowance for Loan and Lease Losses for U.S. Branches and Agencies of Foreign Banking Organizations," and SR letter 95-42, "Allowance for Loan and Lease Losses for U.S. Branches and Agencies of Foreign Banking Organizations." Return to text

3. See https://www.federalreserve.gov/bankinforeg/topics/accounting.htm Return to text

4. Refer to Accounting Standards Update No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. Return to text

5. See SR letter 16-12, "Interagency Guidance on the New Accounting Standard on Financial Instruments – Credit Losses." Return to text

6. With the issuance of this letter, SR letter 17-8, "Frequently Asked Questions on the Current Expected Credit Losses Methodology (CECL)" is superseded. Return to text

7. See http://www.federalreserve.gov/apps/contactus/feedback.aspx. Return to text

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Last Update: July 31, 2020