OCC updates credit loss allowances handbook for bank supervision

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OCC credit loss handbook update

Highlights

OCC issues version 2.0 of the 'Allowances for Credit Losses' handbook, aligning examiner guidance with ASC Topic 326 and rescinding prior versions.
The revised booklet incorporates April 2023 changes to the 'Interagency Policy Statement on Allowances for Credit Losses' and amendments to U.S. GAAP.
All OCC-supervised banks have now adopted the current expected credit losses methodology, with examiners to apply expanded procedures based on individual institutional risk.

Revised examiner guidance and rescissions

As reported by Office of the Comptroller of the Currency, the Office of the Comptroller of the Currency has issued version 2.0 of the “Allowances for Credit Losses” booklet of the Comptroller’s Handbook today to guide examiners reviewing credit loss allowances under Accounting Standards Codification Topic 326, “Financial Instruments-Credit Losses.” The booklet is intended to inform and educate examiners about allowances for credit losses across banks of different sizes, complexity levels, and risk profiles.

With the new issuance, the OCC rescinds version 1.0 of the same booklet, OCC Bulletin 2021-20 that transmitted the earlier version, the “Allowance for Loan and Lease Losses” booklet, and the July 1996 cover letter that transmitted that older handbook section. Examiners are expected to determine whether to use expanded procedures based on risk in individual institutions.

Supervisory and industry implications

The revised booklet reflects that the adoption date for the current expected credit losses methodology under ASC Topic 326 has passed for all banks. It also incorporates the April 2023 revisions to the “Interagency Policy Statement on Allowances for Credit Losses,” along with amendments to U.S. generally accepted accounting principles, new and rescinded OCC and interagency issuances, regulatory changes, and updates to the OCC’s organizational structure.

The Comptroller’s Handbook is designed to support consistent and professional supervision across OCC-supervised banks by helping examiners plan and coordinate examinations, identify concerns, and conduct follow-up work. Although the booklet is designed for examiners, it is also made public to increase transparency into the OCC’s supervisory process.

Our earlier coverage of the Senate Banking Committee’s hearing on CFPB oversight described Republican lawmakers’ push for clearer, more durable consumer-finance rules and tighter limits on the bureau’s approach to regulation. The article highlighted concerns that strict rules on issues like overdraft services and credit card pricing could raise compliance costs and reduce credit access, alongside calls for greater CFPB accountability and structural reforms that could influence future supervision and rulemaking.

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