September 20, 2019

Maybe We Should Just Let the Banks Write Their Own Loan Loss Accounting Rules

Banks really appreciate the effort to move away from the recognition of losses as they occur approach, FASB, but:   

The American Bankers Association has published a “frequently asked questions” document reacting to FASB's approach. The group sees FASB's proposal as an improvement over the existing requirement, but still has concerns. “While the incurred loss model has its problems, ABA believes a (life of loan) expected loss model applied to healthy loans — subject to how it is interpreted — could have adverse consequences,” the ABA says. The group worries about the reliability of forecasts stretching past the first year, and the volatility that could ensue as a result.

There's just no pleasing some people.

[CW]

 

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