ALEXANDRIA, Va. (August 2, 2022) – The National Credit Union Administration, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency, in consultation with state bank and credit union regulators, are inviting public comment on a proposed policy statement (Opens new window) for prudent commercial real estate (CRE) loan accommodations and workouts.
The proposed statement reaffirms the key principles from the October 30, 2009, statement (Opens new window) that serves as a useful resource for both agency staff and financial institutions in understanding risk management and accounting practices for CRE loan workouts. The proposed statement addresses a financial institution’s handling of loan accommodations and workouts on matters like risk management, classification of loans, regulatory reporting, and accounting considerations. It includes updated references to supervisory guidance and updated loan workout examples.
“The proposed policy statement will assist credit unions with managing risks associated with multi-family housing and other commercial real estate,” NCUA Chairman Todd M. Harper said. “It also provides credit unions with guidance on working constructively with CRE borrowers who are experiencing financial difficulty. I encourage credit union stakeholders to review and provide comments on the proposed policy statement.”
The proposed statement additionally reflects changes in U.S. generally accepted accounting principles (GAAP) that have occurred since 2009. This includes eliminating the need for credit unions to identify and account for loan modifications as troubled debt restructurings (TDRs) after adopting the current expected credit losses (CECL) accounting methodology. It also emphasizes that federally insured credit unions (FICUs) with less than $10 million in assets are not required to comply with GAAP, unless the credit union is state-chartered and GAAP compliance is mandated by state law.
Comments are due 60 days from date of publication in the Federal Register.
Agencies Invite Comment on Proposed Commercial Real Estate Loan Workouts and Accommodations Statement
ALEXANDRIA, Va. (August 2, 2022) – The National Credit Union Administration, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency, in consultation with state bank and credit union regulators, are inviting public comment on a proposed policy statement (Opens new window) for prudent commercial real estate (CRE) loan accommodations and workouts.
The proposed statement reaffirms the key principles from the October 30, 2009, statement (Opens new window) that serves as a useful resource for both agency staff and financial institutions in understanding risk management and accounting practices for CRE loan workouts. The proposed statement addresses a financial institution’s handling of loan accommodations and workouts on matters like risk management, classification of loans, regulatory reporting, and accounting considerations. It includes updated references to supervisory guidance and updated loan workout examples.
“The proposed policy statement will assist credit unions with managing risks associated with multi-family housing and other commercial real estate,” NCUA Chairman Todd M. Harper said. “It also provides credit unions with guidance on working constructively with CRE borrowers who are experiencing financial difficulty. I encourage credit union stakeholders to review and provide comments on the proposed policy statement.”
The proposed statement additionally reflects changes in U.S. generally accepted accounting principles (GAAP) that have occurred since 2009. This includes eliminating the need for credit unions to identify and account for loan modifications as troubled debt restructurings (TDRs) after adopting the current expected credit losses (CECL) accounting methodology. It also emphasizes that federally insured credit unions (FICUs) with less than $10 million in assets are not required to comply with GAAP, unless the credit union is state-chartered and GAAP compliance is mandated by state law.
Comments are due 60 days from date of publication in the Federal Register.