U.S. banking governors told banks Friday they could shun the capital implications of a new accounting standard for two years and undertake early a new, more delicate approach to measure risk in an attempt to make sure banks continue lending through the pandemic.
The Fed, Federal Deposit Insurance Corporation and Office of the Comptroller of the Currency said the measures are aimed at reducing challenges for banks to keep giving loans. By permitting banks to dodge a problematic accounting standard and sooner use a new threat measure for counterparties, governors hope to “ease disruptions” that might retard lending.
The regulatory tweak underlines the latest in a long-running attempt by regulators to ease guidelines on banks amid COVID-19 pandemic.
Particularly, regulators stated banks will be able to ignore potentially increased capital requirements they could face under a new world accounting standard. The “current anticipated credit loss” (CECL) standard requires banks to estimate potential future losses on loans, which banks have argued could be notably problematic in the present careworn surroundings.
Banks now would delay for two years the capital impact of the new standard, adopted by a three-year transition interval. The regulatory aid comes as Congress has passed sweeping economic aid legislation that will delay the standard altogether for a year.
The extended delay offered by administrators will be a particular aid to banks, based on analysts.