10.3 Regulator Activities

10.3.1 Interagency FAQs

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.

10.3.2 Interagency Policy Statement

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.

10.3.3 Bank Accounting Advisory Series

In August 2022, 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, TDRs, acquired loans, and allowances for credit losses).

10.3.4 SAB 119

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.

10.3.5 The CARES Act and Interim Final Rule

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 implement the CECL standard (ASU 2016-13) before the end of 2020.

10.3.5.1 Deferral of the CECL Standard

Section 4014 of the CARES Act offers optional temporary relief from the application of ASC 326 for the following qualifying entities:

Insured depository institutions,4 as defined in Section 3 of the Federal Deposit Insurance Act.
Credit unions regulated by the National Credit Union Administration.

Qualifying entities are not required to comply with the requirements of ASC 326 during the period beginning on the date of enactment and ending on the earlier of the following:

The termination date of the national emergency declared under the National Emergencies Act on March 13, 2020, related to the outbreak of COVID-19.
December 31, 2020.

10.3.5.2 Delay of the Impact of the CECL Standard on Regulatory Capital

As noted above, the IFR gives banking organizations that implement ASC 326 before the end of 2020 the option of delaying the estimated impact on regulatory capital stemming from the implementation of the ASC 326 for two years, followed by a three-year transition period.

10.3.5.3 Relief From Troubled Debt Restructurings

Section 4013 of the CARES Act provides temporary relief from the accounting and reporting requirements for TDRs with respect to certain loan modifications related to COVID-19 that are offered by insured depository institutions and credit unions (i.e., the same entities that qualify for the optional deferral of ASC 326 described above). Specifically, under the CARES Act, a qualifying financial institution may elect to suspend (1) the U.S. GAAP requirements for certain loan modifications that would otherwise be categorized as a TDR and (2) any determination that such loan modifications would be considered a TDR, including the related impairment for accounting purposes.

In addition, on April 7, 2020, a group of banking agencies (the “Agencies”)5 issued an interagency statement that offers some practical expedients for evaluating whether loan modifications that occur in response to COVID-19 are TDRs. The interagency statement was originally issued on March 22, 2020, but the Agencies revised it to address the relationship between their TDR accounting and disclosure guidance and the TDR guidance in Section 4013 of the CARES Act.

Footnotes

The CARES Act states that the relief applies to an insured depository institution, bank holding company, or any affiliate thereof.

The Board of Governors of the Federal Reserve System, the FDIC, the National Credit Union Administration, the OCC, the Consumer Financial Protection Bureau, and the State Banking Regulators.

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This publication provides comprehensive guidance; however, it does not address all possible fact patterns, and the guidance is subject to change. Consult a Deloitte & Touche LLP professional regarding your specific issues and questions.