Regulatory Alerts2020-09-30 | 2020-19782Regulatory Capital Rule: Revised Transition of the Current Expected Credit Losses Methodology for Allowances
The Office of the Comptroller of the Currency, Federal Reserve System, and FDIC issued a final rule delaying the regulatory capital impact of CECL for banking organizations adopting it in 2020. The rule permits a two-year deferral of CECL’s capital effect, followed by a three-year transition period, utilizing a uniform 25 percent scaling factor to approximate the difference between CECL and incurred loss allowances. This relief enables financial institutions to sustain lending amid economic uncertainty while preserving regulatory capital quality.
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