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Subject: Policy Statement on Allowance for Loan and Lease Losses Methodologies and Documentation for Banks and Savings Institutions
Date: July 20, 2001
To: Chief Executive Officers of All National Banks, Department and Division Heads, All Examining Personnel and Other Interested Parties
Description: ALLL Methodologies and Documentation
The guidance attached to this bulletin continues to apply to federal savings associations.
On July 6, the Federal Financial Institutions Examination Council issued the attached guidance entitled, "Policy Statement on Allowance for Loan and Lease Losses Methodologies and Documentation for Banks and Savings Institutions." Developed in collaboration with the Securities and Exchange Commission, the policy statement clarifies the agencies’ expectations and provides guidance regarding methodologies and documentation support for the ALLL.
The policy statement does not change the guidance in GAAP, previous joint interagency statements or the consultation provisions between the SEC and the banking agencies included in Section 241 of the Gramm–Leach–Bliley Act. In this regard, it recognizes that:
Financial institutions should find that this guidance not only improves their ALLL process, but also helps safeguard against regulatory criticism regarding the ALLL. Also, while the guidance applies to all banks, it recognizes that smaller institutions need only adopt methodologies and documentation practices that are appropriate for their size and complexity. For institutions with fewer and less complex lending operations and products, the amount of supporting documentation for all the ALLL may be less comprehensive than for more complex situations. Several examples are provided in the guidance.
For more information, contact Richard Shack, senior accountant, or Louise Francis, national bank examiner at (202) 874-5180.
Zane D. Blackburn