OCC releases new Allowances for Credit Losses booklet

Federal Issues OCC Comptroller's Handbook Bank Regulatory

On April 15, the OCC released the “Allowances for Credit Losses” (ACL) booklet to update, consolidate, and rescind various booklets in the Comptroller’s Handbook. The booklet highlights (i) the current expected credit losses methodology’s scope, risks associated with ACLs, and seven primary components used to estimate ACLs; (ii) documentation and considerations for expected credit losses, estimation processes, the maintenance of appropriate ACLs, the responsibilities of boards of directors and management, and examiner reviews of ACLs; and (iii) procedures to aid examiners when assessing appropriateness of a bank’s ACL methodologies and balances. In addition, the booklet is consistent with the “Interagency Policy Statement on Allowances for Credit Losses” included in OCC Bulletin 2020-49 and “Frequently Asked Questions on the New Accounting Standard on Financial Instruments—Credit Losses” conveyed by OCC Bulletin 2019-17.