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FDIC proposes new standards TDRs
On July 20, the FDIC issued a notice of proposed rulemaking (NPR) to incorporate updated accounting standards in the risk-based deposit insurance assessment system applicable to all large and highly complex insured depository institutions (IDIs). The NPR is in response to the Financial Accounting Standards Board’s elimination of accounting guidance for troubled debt restructurings (TDR) for adopters of the current expected credit loss standard. The NPR noted that the “FDIC calculates deposit insurance assessment rates for large and highly complex IDIs based on supervisory ratings and financial measures, including the underperforming assets ratio and the higher-risk assets ratio, both of which are determined, in part, using restructured loans or [TDRs].” Both of these measures, the underperforming assets ratio and higher-risk assets ratio, are used to determine deposit insurance assessments for large and highly complex [IDIs]. According to the FDIC, the NPR “would amend the assessment regulations to include a new term, ‘modifications to borrowers experiencing financial difficulty’” for the underperforming assets ratio and higher-risk assets ratio. The NPR does not apply to FDIC-insured and/or FDIC- supervised institutions with less than $10 billion in total consolidated assets. Comments are due 30 days after publication the Federal Register.
FDIC updates Covid-19 FAQs for financial institutions
On April 15, the FDIC released updates to its list of Covid-19 frequently asked questions (FAQs) for financial institutions. The FAQs were originally released on March 19, covering bank operational issues and urging banks to work with borrowers who are experiencing payment difficulties due to Covid-19, as reported by InfoBytes here. New FAQs discuss credit reporting of payment accommodations, reminding lenders to report borrower accounts as current, provided the borrowers continue to observe the terms of the accommodations. The guidance also points financial institutions to a recent CFPB statement (covered here) for guidance on the FCRA under the CARES Act. The FDIC also updated the Troubled Debt Restructurings (TDRs) guidance, emphasizing that financial institutions do not need to classify Covid-19 borrower payment accommodations as TDRs if certain criteria are met, and that examiners “will not criticize prudent efforts to modify the terms on existing loans to affected customers.” Other updates to the FAQs include, among other things: (i) obligations to obtain updated real estate valuation information for Covid-19 related loan modifications; (ii) the use of alternative signatures for Part 363 annual reports and other notices; (iii) real estate loans in excess of loan-to-value percentages for loans refinanced by borrowers impacted by Covid-19; (iv) risk-based capital rules regarding multi-family loan modifications; (v) eligible Community Reinvestment Act activities during the Covid-19 pandemic; and (vi) Bank Secrecy Act issues regarding filing requirements, raising compliance challenges with FinCEN, and whether loans under the Small Business Administration’s Paycheck Protection Program are considered new accounts for customer due diligence purposes.