Press Releases
Press Release
For Immediate Release September 7, 2000

The Federal Deposit Insurance Corporation, Federal Reserve Board, Office of the Comptroller of the Currency and Office of Thrift Supervision are jointly requesting comment on a proposed Policy Statement on Allowance for Loan and Lease Losses (ALLL) Methodologies and Documentation for Banks and Savings Institutions.

The full text of the guidance was published in the Federal Register today and comments are requested by November 6, 2000.

The proposed Policy Statement, which was developed in consultation with the Securities and Exchange Commission staff, provides guidance on the design and implementation of ALLL methodologies and supporting documentation practices.

The proposed Policy Statement provides guidance on significant aspects of ALLL methodologies and documentation practices. Specifically, the proposal:

  • clarifies that the board of directors of each institution is responsible for ensuring that controls are in place to determine the appropriate level of the ALLL;
  • states that ALLL process must be thorough, disciplined, and consistently applied and must incorporate management's current judgments about the credit quality of the loan portfolio;
  • emphasizes the banking agencies' long-standing position that institutions should maintain and support the ALLL with documentation that is consistent with their stated policies and procedures, generally accepted accounting principles (GAAP), and applicable supervisory guidance; and
  • provides guidance on maintaining and documenting policies and procedures that are appropriately tailored to the size and complexity of the institution and its loan portfolio.

The proposal 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 proposal is not intended to change existing accounting guidance in, or modify the documentation requirements of, GAAP or guidance provided in the relevant joint interagency statements.