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Federal Reserve Board Approves Proposal to Revise Regulatory Capital Rules
Revision designed to address and provide an option to phase in the effects of the new accounting standard for credit losses
(April 13, 2018) - - The Federal Reserve Board on Friday announced it had approved a proposal to revise its regulatory capital rules to address and provide an option to phase in the regulatory capital effects of the new accounting standard for credit losses, known as the "Current Expected Credit Losses" (CECL) methodology.
The proposal addresses the regulatory capital treatment of credit loss allowances under the CECL methodology and would allow banking organizations to phase in the day-one regulatory capital effects of CECL adoption over three years. The proposal would revise the Board's regulatory capital rules and other rules to take into consideration the new accounting standard.
In June 2016, the Financial Accounting Standards Board issued a new accounting standard for credit losses that includes the CECL methodology and replaces the existing incurred loss methodology for certain financial assets. The effective date of the standard varies for different banking organizations and may be early adopted in January 2019.
The Board is coordinating this rulemaking with the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency. Comments on the proposal will be accepted for 60 days after publication in the Federal Register.
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