All federal bank regulators—in addition to the Wisconsin DFI—are working to provide banks with the information and resources they need in order to help their struggling customers and communities through this crisis. On March 19, the FDIC alone disseminated four notices to U.S. banks with updates and guidance related to the COVID-19 pandemic and economic havoc it is wreaking. Two important updates from today (March 19) are regarding CRA considerations and CECL implementation:
Of most interest to Wisconsin banks, the Federal Reserve, FDIC, and OCC issued a joint statement encouraging financial institutions to work with customers affected by the coronavirus disease, particularly those who are low- and moderate-income. The statement notifies banks that the agencies will “provide favorable consideration of certain retail banking services, retail lending activities, and community development activities related to this national emergency,” pursuant to the Community Reinvestment Act (CRA).
The statement, which is applicable to institutions with total assets under $1 billion, further highlights the agencies’ considerations:
- “The agencies recognize that financial institutions working with affected customers during disasters and national emergencies serves the long-term interests of these communities and the financial system, when consistent with safe and sound banking practices and applicable laws, including consumer protection laws.
- Pursuant to the CRA, the agencies will favorably consider retail banking services and retail lending activities in a financial institution's assessment areas that are responsive to the needs of low- and moderate-income individuals, small businesses, and small farms affected by COVID-19 consistent with safe and sound banking practices.
- In light of the declaration of a national emergency, the attached interagency statement clarifies that financial institutions will receive CRA consideration for community development (CD) activities.
- Qualifying CD activities include those that help to revitalize or stabilize low- or moderate-income geographies as well as distressed underserved non-metropolitan middle-income geographies, and that support community services targeted to low- or moderate-income individuals.
- Favorable consideration will be given to CD activities located in a broader statewide or regional area that includes a bank's CRA Assessment Area and that help to stabilize communities affected by the COVID-19, provided that such institutions are responsive to the CD needs and opportunities that exist in their own assessment area(s).”
The statement will be effective through six months after the national state of emergency is lifted.
On March 19, FDIC Chairman Jelena McWilliams sent a letter to the Financial Accounting Standards Board (FASB) urging a delay of CECL implementation and exclusions from certain rules. The FDIC’s mission is to promote public confidence and stability in the U.S. financial system, McWilliams wrote, and “today we are confronting new and uncertain challenges in view of the worldwide pandemic.”
Specifically, McWilliams requested permission for financial institutions currently subject CECL methodology an option to postpone implementation of CECL given the current economic environment and imposing a moratorium on the effective date for those institutions that are not currently required to implement CECL to allow these financial institutions to focus on immediate business challenges relating to the impacts of the current pandemic and its effect on the financial system.
In addition, McWilliams requested excluding COVID-19-related modifications from being considered a concession when determining a troubled debt restructuring (TDR) classification.
“To support the [banking] industry’s efforts to focus on their employees and customers,” McWilliams’ letter said, “I encourage FASB to take these much-needed actions to allow banks to help their communities at this time of need.”