ABA comments on proposed update to CRE loan accommodations statement

ABA today submitted comments on an interagency proposal to update a 2009 policy statement regarding accommodations and workouts for commercial real estate loans whose borrowers are experiencing financial difficulty. Specifically, the proposal would update the policy by recognizing the recent elimination of accounting for troubled debt restructurings.

In its comments, ABA welcomed the effort—particularly the inclusion of new examples related to loan accommodation—but raised concerns that the proposed changes would leave many references to TDRs in place and that they equate “modifications to borrowers experiencing financial difficulty,” or MBEFDs, with TDRs for reporting purposes. With that in mind, the association recommended that guidance for post-TDR accounting should exclude TDR analysis, that call reporting relating to CRE modifications should be included in a final policy statement, and that MBEFD metrics should not be considered as equivalent replacements for TDRs. ABA also cautioned that banks are in the early stages of implementing the new accounting standards, so it would be best to wait until the operational impacts are better understood to assess whether additional updates are needed.