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Bloomberg: Banks’ Loan-Loss Reserves Seen Jumping 50% in FASB Proposal

December 21, 2012, 07:00 AM
Filed Under: Regulatory News

According to a Bloomberg report, Banks’ loan-loss reserves may jump 50% under a proposed U.S. accounting-rule change that redefines how quickly firms must recognize bad debts, standard-setters said.
The report outlines how the proposed rule pushes banks to start recognizing losses on loans, debt securities and other financial receivables when firms see early signs of potential loss.  According to Bloomberg, the policy would move from an “incurred loss” model to an “expected loss” model, similar to changes under consideration by the International Accounting Standards Board.

FASB’s estimate shows banks probably would need to boost reserves by billions of dollars if the new rule is implemented.

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