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Final CECL Rule Approved; Three-Year Phase-in Period Provided

December 27, 2018, 07:15 AM
Filed Under: Regulatory News

The federal bank regulatory agencies approved a final rule modifying their regulatory capital rules and providing an option to phase in over a period of three years the day-one regulatory capital effects of the update to the accounting standard known as the "Current Expected Credit Losses" (CECL) methodology. The final rule also revises the agencies' other rules to reflect the update to the accounting standards.

The Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency jointly announced the approval.

In June 2016, the Financial Accounting Standards Board issued an update to the accounting standards for credit losses that included the CECL methodology, which replaces the existing incurred loss methodology for certain financial assets. During the phase in, the agencies will continue to monitor the impact of CECL adoption.

The final rule will take effect April 1, 2019. Banking organizations that choose to early adopt CECL may elect to adopt the rule as of the first quarter 2019.

To read the final rule, click here.

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