On April 17, 2018—responding to significant industry concerns regarding the negative consequences of the required adoption of Accounting Standards Update 2016-13 (Topic 326), Financial Instruments – Credit Losses—the US prudential banking agencies proposed an option to phase-in over three years the day-one adverse effects that this new accounting standard may have on a banking organization’s regulatory capital and to amend related regulatory disclosure and stress-testing (and related provisioning) requirements. This Legal Update discusses this new accounting standard for credit losses and the changes that the bank regulators propose.
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