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Financial Services Law Insights and Observations

Agencies seek comment on CRE loan statement

Agency Rule-Making & Guidance Bank Regulatory FDIC OCC NCUA FFIEC Federal Register Commercial Lending

Agency Rule-Making & Guidance

On August 2, the FDIC, OCC, and NCUA (collectively, “the agencies”) issued a notice in the Federal Register soliciting public comment on an updated policy statement regarding accommodations and workouts for commercial real estate (CRE) loans whose borrowers are experiencing financial difficulty. In 2009, the Policy Statement on Prudent Commercial Real Estate Loan Workouts was issued by the FFIEC, which the agencies view “as being useful for both agency staff and financial institutions in understanding risk management and accounting practices for [] CRE loan workouts.” Among other things, the statement would include (i) a new section on short-term loan accommodations; (ii) information about changes in accounting principles since 2009; and (iii) revisions and additions to examples of CRE loan workouts. The new updated statement would also “address relevant accounting changes on estimating loan losses and provide updated examples of how to classify and account for loans modified or affected by loan accommodations or loan workout activity.” Specifically, the agencies seek input on how the document reflects sound practices in CRE loan accommodation and what additional information can be included to optimize the guidance of managing CRE loan portfolios.

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