Regulatory Alerts2008-04-22
Alabama State Banking Department Guidance on the Interagency Policy Statement on the Allowance for Loan and Lease Losses
The Alabama State Banking Department issued this memorandum to clarify state-chartered banks' compliance requirements with the federal Interagency Policy Statement on the Allowance for Loan and Lease Losses. The guidance mandates that banks implement a two-tiered evaluation process using FAS 114 for individually assessed impaired loans and FAS 5 for collectively evaluated loan groups to determine appropriate reserve levels. Effective in 2008, non-compliance with these revised methodologies will be treated as a formal violation, emphasizing the necessity for prudent management judgment and robust supporting documentation.
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