10.3 Regulator Activities

In April 2019, the federal financial institution regulatory agencies issued updated FAQs to help institutions and examiners with the implementation of the accounting standard on credit losses. The updates can be summarized as follows:

• The updated FAQs combined recent Q&As (FAQs 38 through 46) as well as those previously issued in 2017 and 2016.
• Recent FAQs address collateral-dependent loans; reasonable and supportable forecasts; internal control considerations related to data; and the continued relevance of concepts, processes, and practices in existing supervisory guidance on the allowance for loan and lease losses.
• Certain previously issued FAQs have been updated in response to recent developments, including the amendment to the effective date for non-PBEs.
• The appendix to the FAQs includes links to relevant resources that are available to institutions to assist with the implementation of CECL.

In April 2023, the federal financial institution regulatory agencies issued an updated interagency policy statement on allowances for credit losses. The policy statement is intended to promote consistency in the interpretation and application of ASC 326 and updates concepts and practices detailed in existing supervisory guidance that remain applicable.

In August 2023, the OCC released the annual update to its Bank Accounting Advisory Series, which “expresses the OCA’s interpretations of accounting topics relevant to national banks and federal savings associations.” The publication includes Topic 12, “Credit Losses,” which addresses various questions related to ASU 2016-13 (e.g., credit losses on AFS and HTM debt securities, loan modifications, acquired loans, and allowances for credit losses).

In November 2019, the SEC staff issued SAB 119 to update the staff’s guidance in light of the FASB’s issuance of ASU 2016-13. The SAB addresses the staff’s expectation for management’s policies, procedures, internal controls, and documentation of judgments related to ASC 326. An SEC registrant must apply the guidance in SAB 119 when it adopts ASU 2016-13.

On March 27, 2020, the CARES Act was signed into law to provide relief from certain accounting and financial reporting requirements under U.S. GAAP. The CARES Act, in part, provides certain qualifying entities with optional temporary relief from the application of ASC 326. In addition, the Board of Governors of the Federal Reserve System, the FDIC, and the OCC issued an interim final rule (IFR) that, as of its effective date of March 31, 2020, gives certain qualifying entities the option of delaying the estimated impact on regulatory capital stemming from the implementation of ASC 326 for two years, followed by a three-year transition period. The IFR applies to banking organizations that implemented the CECL standard (ASU 2016-13) before the end of 2020.