Responding to draft Basel Committee guidance on bank examination procedures for accounting for expected credit losses, ABA cautioned the committee that regulatory expectations must be proportional to the size and sophistication of individual banks.
The guidance, when approved, is intended to become the basis for bank examinations worldwide and — while intended mainly for large, internationally-active banks — U.S. regulators may apply the guidance to examinations of banks of all sizes. As drafted, the guidance sets detailed expectations that often closely link credit risk management, capital management and accounting, while also listing specific steps in those processes.
Noting that the Federal Accounting Standards Board has not issued its new impairment accounting standard, ABA warned that much of the guidance focuses on the recently finalized international accounting standard on impairment and may need additional changes once the FASB standard is finalized. In a separate letter to the U.S. banking agencies, ABA recommended that any changes to industry guidance related to accounting for loan losses be subject to the formal rulemaking process to ensure that all perspectives are considered prior to finalizing the guidance.