FDIC Asks Accounting Standards Board to Pause New Loan Loss Standard

The Federal Deposit Insurance Corp. (FDIC) on Thursday sent a letter to the Financial Accounting Standards Board (FASB) that urged the agency to delay implementation of a new accounting standard that is expected to significantly increase loan loss reserves at many of the nation's top banks.

The current expected credit loss (CECL) methodology requires banks to forecast losses over the life of a loan as soon as they originate that loan, and account for those losses as soon as the loan hits the balance sheet. It went into effect at the start of this year for all public companies that file with the Securities and Exchange Commission.

Under the old method, banks did not record losses on a loan until an event gave them reason to believe a borrower might not be able to make their loan payments.

Source Fool.com