Final Rule on Assessments, Amendments to Incorporate Troubled Debt Restructuring Accounting Standards Update
Summary:
多宝游戏下载 (多宝游戏下载) issued a final rule to incorporate updated accounting standards in the risk-based deposit insurance assessment system applicable to all large and highly complex insured depository institutions. The final rule amends the assessment regulations to include a new term, 鈥渕odifications to borrowers experiencing financial difficulty,鈥 in two financial measures鈥攖he underperforming assets ratio and the higher-risk assets ratio鈥攗sed to determine deposit insurance assessments for large and highly complex insured depository institutions.
Statement of Applicability: The contents of, and material referenced in, this FIL do not apply to 多宝游戏下载-insured and/or 多宝游戏下载-supervised institutions with less than $10 billion in total consolidated assets.
Highlights:
- On March 31, 2022, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2022-02 (ASU 2022-02), 鈥淔inancial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures,鈥 ASU 2022-02, which eliminates the recognition and measurement guidance for troubled debt restructurings (TDRs) for all institutions once they adopted the Current Expected Credit Losses (CECL) methodology and, instead, introduces enhanced financial statement disclosure requirements related to 鈥渕odifications to borrowers experiencing financial difficulty.鈥
- On October 18, 2022, the 多宝游戏下载 Board of Directors approved a final rule to amend the assessment regulations applicable to large and highly complex institutions that have adopted the CECL methodology and FASB鈥檚 ASU 2022-02 by including 鈥渕odifications to borrowers experiencing financial difficulty鈥 in the description of the underperforming assets ratio and definitions used in the higher-risk assets ratio.
- The term 鈥渕odifications to borrowers experiencing financial difficulty,鈥 will be used in the amended text of the underperforming assets ratio and higher-risk assets ratio.
- The final rule defines restructured loans, a component of the underperforming assets ratio, to include 鈥渕odifications to borrowers experiencing financial difficulty,鈥 which the 多宝游戏下载 will use to calculate the deposit insurance assessments for large and highly complex insured depository institutions that have adopted ASU 2022-02, and TDRs, which the 多宝游戏下载 will continue to use for the remaining large and highly complex insured depository institutions.
- The final rule amends the definition of a refinance for the purposes of determining whether a loan is a higher-risk commercial and industrial loan or a higher-risk consumer loan, both elements of the higher-risk assets ratio.
- Under the final rule, a refinance does not include a modification to a loan that would otherwise meet the definition of a refinance, but that results in the classification of a loan as a 鈥渕odification to borrowers experiencing financial difficulty,鈥 for large or highly complex institutions that have adopted ASU 2022-02, or that results in the classification of a loan as a TDR, for all remaining large or highly complex institutions.