2018-08999: Regulatory Capital Rules: Implementation and Transition of the Current Expected Credit Losses Methodology for Allowances and Related Adjustments to the Regulatory Capital Rules and Conforming Amendments to Other Regulations

Summary

The Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, and the Federal Deposit Insurance Corporation (collectively, the agencies) are inviting public comment on a joint proposal to address changes to U.S. generally accepted accounting principles (U.S. GAAP) described in Accounting Standards Update No. 2016-13, Topic 326, Financial Instruments--Credit Losses (ASU 2016-13), including banking organizations' implementation of the current expected credit losses methodology. Specifically, the proposal would revise the agencies' regulatory capital rules to identify which credit loss allowances under the new accounting standard are eligible for inclusion in regulatory capital and to provide banking organizations the option to phase in the day-one adverse effects on regulatory capital that may result from the adoption of the new accounting standard. The proposal also would amend certain regulatory disclosure requirements to reflect applicable changes to U.S. GAAP covered under ASU 2016-13. In addition, the agencies are proposing to make amendments to their stress testing regulations so that covered banking organizations that have adopted ASU 2016-13 would not include the effect of ASU 2016-13 on their provisioning for purposes of stress testing until the 2020 stress test cycle. Finally, the agencies are proposing to make conforming amendments to their other regulations that reference credit loss allowances.

The agency’s own summary, as published.

What this changes

Amends 20 parts of the Code of Federal Regulations — the standing rules this notice rewrites.

• 12 CFR 1 Investment Securities
• 12 CFR 3 Capital Adequacy Standards
• 12 CFR 5 Rules, Policies, and Procedures for Corporate Activities
• 12 CFR 23 Leasing
• 12 CFR 24 Community and Economic Development Entities, Community Development Projects, and Other Public Welfare Investments
• 12 CFR 32 Lending Limits
• 12 CFR 34 Real Estate Lending and Appraisals
• 12 CFR 46 Stress Testing
• 12 CFR 208 Membership of State Banking Institutions in the Federal Reserve System (Regulation H)
• 12 CFR 211 International Banking Operations (Regulation K)
• 12 CFR 215 Loans to Executive Officers, Directors, and Principal Shareholders of Member Banks (Regulation O)
• 12 CFR 217 Capital Adequacy of Bank Holding Companies, Savings and Loan Holding Companies, and State Member Banks (Regulation Q)
• 12 CFR 223 Transactions Between Member Banks and Their Affiliates (Regulation W)
• 12 CFR 225 Bank Holding Companies and Change in Bank Control (Regulation Y)
• 12 CFR 252 Enhanced Prudential Standards (Regulation YY)
• 12 CFR 324 Capital Adequacy of FDIC-Supervised Institutions
• 12 CFR 325 Stress Testing
• 12 CFR 327 Assessments
• 12 CFR 347 International Banking
• 12 CFR 390 Regulations Transferred from the Office of Thrift Supervision