Proposed regulatory capital treatment under CECL
Proposed regulatory capital treatment under CECL
Insight

Proposed regulatory capital treatment under CECL

FRB is providing firms with an option to phase-in "Day 1" adverse impact over a three-year period.

The Federal Reserve Board (FRB), Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC) published a joint proposal to:

  • Address the regulatory capital treatment of credit loss allowances under the “Current Expected Credit Losses” (CECL) accounting standard
  • Provide relief by allowing firms to phase in the day-one regulatory capital effects of CECL adoption over three years

CECL requires firms to recognize “Lifetime Expected Credit Losses” of Financial Assets measured at amortized costs. This applies to firms subject to the regulatory capital rules of all agencies (OCC, FRB & FDIC) and conform to U.S. GAAP. The proposed changes will result in regulatory capital impact across key areas.