Regulatory Alerts2020-05-19 | 2020-08789Regulatory Capital Rule: Revised Transition of the Current Expected Credit Losses Methodology for Allowances; Correction
The Office of the Comptroller of the Currency, Federal Reserve Board, and FDIC issued a correcting amendment to their March 2020 interim final rule governing the regulatory capital transition for Current Expected Credit Losses (CECL) allowances. The amendment replaces "U.S. GAAP" with the defined term "GAAP," clarifies that Category III banking organizations remain eligible for supplementary leverage ratio provisions, and specifies that transitional amounts for retained earnings, deferred tax assets, and credit loss allowances may be positive or negative based on day-one adoption changes. Effective immediately with retroactive applicability to March 31, 2020, the rule waives standard notice-and-comment and delayed effective date requirements to address ongoing market uncertainty and ensure banking institutions can accurately calculate capital impacts during economic disruptions.