Federal Financial Institutions Examination Council
|For Immediate Release||July 6, 2001|
The Federal Financial Institutions Examination Council today issued a Policy Statement on Allowance for Loan and Lease Losses (ALLL) Methodologies and Documentation for Banks and Savings Institutions.
The Policy Statement, developed in consultation with the Securities and Exchange Commission (SEC) staff, provides guidance on the design and implementation of ALLL methodologies and supporting documentation practices. Specifically, it:
The Policy Statement also includes illustrations of implementation practices that institutions may find useful for enhancing their own ALLL processes; an appendix that provides examples of certain key aspects of ALLL guidance; a summary of applicable GAAP guidance; and a bibliographical list of relevant GAAP guidance, joint interagency statements, and other literature on ALLL issues.
The Policy Statement does not change existing accounting guidance in, or modify the documentation requirements of, GAAP or guidance provided in the relevant joint interagency statements. In this regard, the Policy Statement recognizes that estimating an appropriate allowance involves a high degree of management judgment and is inevitably imprecise. Accordingly, an institution may determine that the amount of loss falls within a range. In accordance with GAAP, an institution should record its best estimate within the range of loan losses.
The Policy Statement was issued in proposed form on September 7, 2000.
Parallel guidance on loan loss methodologies and documentation was issued today by the SEC staff through their Staff Accounting Bulletin 102.
The full text of the Policy Statement was published in the Federal Register
The FFIEC was established in March 1979 to prescribe uniform principles, standards, and report forms and to promote uniformity in the supervision of financial institutions. The Council has five member agencies: the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the National Credit Union Administration, the Office of the Comptroller of the Currency, and the Office of Thrift Supervision. The Council's activities are supported by interagency task forces and by an advisory State Liaison Committee, comprised of five representatives of state agencies that supervise financial institutions.