Allowance for Loan and Lease Losses (ALLL)

The purpose of the ALLL is to reflect estimated credit losses within a bank’s portfolio of loans and leases. Estimated credit losses are estimates of the current amount of loans that are probable that the bank will be unable to collect given the facts and circumstances since the evaluation date (generally the balance sheet date). That is, estimated credit losses represent net charge-offs that are likely to be realized for a loan or group of loans as of the evaluation date. The ALLL is presented on the balance sheet as a contra-asset account that reduces the amount of the loan portfolio reported on the balance sheet.

Policy Letters

Allowance for Loan and Lease Losses (ALLL)

Interagency Guidance on Home Equity Lines of Credit Nearing Their End-of-Draw Periods

Uniform Agreement on the Classification and Appraisal of Securities Held by Depository Institutions

Interagency Supervisory Guidance Addressing Certain Issues Related to Troubled Debt Restructurings

Interagency Guidance on Allowance Estimation Practices for Junior Lien Loans and Lines of Credit

Interagency Guidance on Concentrations in Commercial Real Estate

Interagency Policy Statement on the Allowance for Loan and Lease Losses (ALLL)

Interagency Guidance on Nontraditional Mortgage Product Risks

Interagency Credit Risk Management Guidance for Home Equity Lending

Account Management and Loss Allowance Methodology for Credit Card Lending

Final Interagency Policy Statement on Allowance for Loan and Lease Losses (ALLL) Methodologies and Documentation for Banks and Savings Institutions

Guidance on Supervision of Subprime Lending

Allowance for Loan and Lease Losses for U.S. Branches and Agencies of Foreign Banking Organizations

Supervisory Guidance Related to FASB Statement No. 114

Allowance for Loan and Lease Losses for U.S. Branches and Agencies of Foreign Banking Organizations

Notification to State Member Banks on Federal Reserve Confirmations of Charge-offs Declared for Tax Purposes

Current Expected Credit Losses (CECL) Methodology

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

Interagency Guidance on the New Accounting Standard on Financial Instruments – Credit Losses

Additional Resources

  • Frequently Asked Questions on the New Accounting Standard on Financial Instruments--Credit Losses
  • Call Report Instructions

Manual References

  • Bank Holding Company Supervision Manual
    • Section 2065.2, "Determining an Adequate Level for the Allowance for Loan and Lease Losses (Accounting, Reporting, and Disclosure Issues)"
    • Section 2065.3, "Maintenance of an Appropriate Allowance for Loan and Lease Losses (Accounting, Reporting, and Disclosure Issues)"
    • Section 2065.4, "ALLL Methodologies and Documentation (Accounting, Reporting, and Disclosure Issues)"
  • Commercial Bank Examination Manual
    • Section 2070.1, "Allowance for Loan and Lease Losses"
    • Section 2072.1, "ALLL Methodologies and Documentation"
    • Section 2073.1, "ALLL Estimation Practices for Loans Secured by Junior Liens"
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Last Update: May 19, 2017