Banking Regulators Issue Revised Statement on Accounting for Certain Loan Modifications

In a revised interagency statement, banking regulators clarified certain accounting and reporting factors under the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act").

In the revised interagency statement, the regulators "clarified the interaction between the March 22, 2020, interagency statement and Section 4013 of the CARES Act ("Temporary Relief from Troubled Debt Restructurings"), as well as the agencies’ views on consumer protection considerations." In addition, the Regulators offered guidance to financial institutions on supervisory procedures concerning delayed or nonaccrual regulatory reporting for loan modification programs and regulatory capital.

As previously covered, the Federal Reserve Board ("FRB"), FDIC, National Credit Union Administration ("NCUA"), the Office of the Comptroller of the Currency, and the CFPB (collectively, the "Regulators") stated that loan modification programs are "positive actions" to avoid adverse effects on borrowers impacted by COVID-19. The Regulators stated that they would not: (i) require financial institutions to categorize borrowers who receive loan modifications due to COVID-19 as "troubled debt restructurings" ("TDR"); or (ii) criticize financial institutions for implementing a credit risk mitigation strategy relating to borrowers and the COVID-19 pandemic that is consistent with safe and sound practices.