17th April 2018

Federal Reserve approves proposal to revise regulatory capital rules

The Federal Reserve Board has 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 organisations 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 organisations 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.