The Fed - SR 20-12: Interagency Policy Statement on Allowances for Credit Losses Skip to main content An official website of the United States GovernmentHere's how you know Official websites use .gov A .gov website belongs to an official government organization in the United States. Secure .gov websites use HTTPS A lock (LockLocked padlock icon ) or https:// means you've safely connected to the .gov website. Share sensitive information only on official, secure websites. Back to Home Board of Governors of the Federal Reserve System Stay Connected Federal Reserve Facebook Page Federal Reserve Instagram Page Federal Reserve YouTube Page Federal Reserve Flickr Page Federal Reserve LinkedIn Page Federal Reserve Threads Page Federal Reserve X Page Federal Reserve Bluesky Page Subscribe to RSS Subscribe to Email Recent Postings Calendar Publications Site Map A-Z index Careers FAQs Videos Contact Search Submit Search Button Advanced Toggle Dropdown Menu Board of Governors of the Federal Reserve System The Federal Reserve, the central bank of the United States, provides the nation with a safe, flexible, and stable monetary and financial system. Main Menu Toggle Button Sections Search Toggle Button Search Search Submit Button Submit About the Fed Structure of the Federal Reserve System The Fed Explained Board Members Advisory Councils Federal Reserve Banks Federal Reserve Bank and Branch Directors Federal Reserve Act Currency Board Meetings Board Votes Careers Do Business with the Board Holidays Observed - K.8 Ethics & Values Contact Requesting Information (FOIA) FAQs Economic Education Fed Financial Statements Financial Innovation News & Events Press Releases Speeches & Testimony Calendar Videos Photo Gallery Conferences Monetary Policy Federal Open Market Committee About the FOMC Meeting calendars and information Transcripts and other historical materials FAQs Monetary Policy Principles and Practice Notes Policy Implementation Policy Normalization Policy Tools Reports Monetary Policy Report Beige Book Federal Reserve Balance Sheet Developments Review of Monetary Policy Strategy, Tools, and Communications Overview Supervision & Regulation Supervision Community Banks Regional Banks and Foreign Banks with U.S. Assets Large Banks and Large Foreign Banks Global Systemically Important Banks Financial Market Utilities Consumer Compliance Resources for Supervised Institutions Reports Federal Reserve Supervision and Regulation Report Reporting Forms Recent Reporting Form Updates Information Collections Under Review Financial Statements Securities Exchange Act of 1934 Applications/Structure Change FFIEC Municipal and Government Securities Activities Monitoring Micro Data Reference Manual Legal Developments Enforcement Actions and Legal Developments Mergers, Acquisitions, and Other Applications Process Filing Information Board and Reserve Bank Actions Supervision and Regulation Letters By Year By Topic Regulatory and Policy Resources Federal Reserve Act Bank Holding Company Act Regulations Supervision Manuals Federal Reserve Regulatory Service Disaster Preparedness and Recovery Resources Banking and Data Structure Beneficial Ownership Reports Large Commercial Banks Minority Depository Institutions U.S. Offices of Foreign Entities Financial Holding Companies Interstate Branching Securities Underwriting and Dealing Subsidiaries State Member Banks Supervised by the Federal Reserve Financial Stability Financial Stability Assessments About Financial Stability Types of Financial System Vulnerabilities & Risks Monitoring Risk Across the Financial System Proactive Monitoring of Markets & Institutions Financial Stability & Stress Testing Financial Stability Coordination & Actions Responding to Financial System Emergencies Cooperation on Financial Stability Reports Financial Stability Report Payment Systems Regulations & Statutes Regulation CC (Availability of Funds and Collection of Checks) Regulation II (Debit Card Interchange Fees and Routing) Regulation HH (Financial Market Utilities) Other Regulations and Statutes Payment Policies Federal Reserve's Key Policies for the Provision of Financial Services Guidelines for Evaluating Joint Account Requests Overnight Overdrafts Payment System Risk Sponsorship for Priority Telecommunication Services Reserve Bank Payment Services & Data Automated Clearinghouse Services Check Services Currency and Coin Services Daylight Overdrafts and Fees FedNow® Service Fedwire Funds Services Fedwire Securities Services Fiscal Agency Services Master Account and Services Database National Settlement Service Financial Market Utilities & Infrastructures Supervision & Oversight of Financial Market Infrastructures Designated Financial Market Utilities International Standards for Financial Market Infrastructures Research, Reports, & Committees Federal Reserve Payments Study (FRPS) Payments Research Reports Payments System Policy Advisory Committee Economic Research Meet the Researchers Working Papers and Notes Finance and Economics Discussion Series (FEDS) FEDS Notes International Finance Discussion Papers (IFDP) Data, Models and Tools Economic Research Data FRB/US Model Estimated Dynamic Optimization (EDO) Model Survey of Consumer Finances (SCF) Data Data Download Program Bank Assets and Liabilities Aggregate Reserves of Depository Institutions and the Monetary Base - H.3 Assets and Liabilities of Commercial Banks in the U.S. - H.8 Assets and Liabilities of U.S. Branches and Agencies of Foreign Banks Charge-Off and Delinquency Rates on Loans and Leases at Commercial Banks Senior Financial Officer Survey Senior Loan Officer Opinion Survey on Bank Lending Practices Bank Structure Data Large Commercial Banks Minority Depository Institutions Structure and Share Data for the U.S. Offices of Foreign Banks Business Finance Commercial Paper Finance Companies - G.20 New Security Issues, State and Local Governments New Security Issues, U.S. Corporations Dealer Financing Terms Senior Credit Officer Opinion Survey on Dealer Financing Terms Exchange Rates and International Data Foreign Exchange Rates - H.10/G.5 International Summary Statistics Securities Holdings and Transactions Statistics Reported by Banks and Other Financial Firms in the United States Structure and Share Data for U.S. Offices of Foreign Banks Financial Accounts Financial Accounts of the United States - Z.1 Household Finance Consumer Credit - G.19 Household Debt Service Ratios Mortgage Debt Outstanding Survey of Consumer Finances (SCF) Survey of Household Economics and Decisionmaking Industrial Activity Industrial Production and Capacity Utilization - G.17 Interest Rates Selected Interest Rates - H.15 Micro Data Reference Manual (MDRM) Micro and Macro Data Collections Money Stock and Reserve Balances Factors Affecting Reserve Balances - H.4.1 Money Stock Measures - H.6 Other Yield Curve Models and Data Consumers & Communities Regulations Community Reinvestment Act (CRA) All Regulations Supervision & Enforcement CA Letters Enforcement Actions Independent Foreclosure Review Community Development Housing and Neighborhood Revitalization Small Business and Entrepreneurship Employment and Workforce Development Community Development Finance Rural Community and Economic Development Conferences Research & Analysis Survey of Household Economics and Decisionmaking Research Publications & Data Analysis Community Advisory Council Resources for Consumers Frauds and Scams Mortgage and Foreclosure Resources Federal Reserve Community Development Resources Home Supervision & Regulation Supervision and Regulation Letters 2020 Supervision and Regulation Letters below when display/hiding this option -- Share PDF RSS By topic TAG SO THAT THE SUBJECT DOES NOT WRAP TO A NEW LINE WITHIN THE H3-- SR 20-12: Interagency Policy Statement on Allowances for Credit Losses BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D.C. 20551 DIVISION OF SUPERVISION AND REGULATION SR 20-12 May 8, 2020 Revised April 21, 2023 Attachment Reposted April 21, 2023 On April 21, 2023, the Interagency Policy Statement on Allowances for Credit Losses, which is attached to this letter, was revised to remove references to troubled debt restructurings (TDRs) to conform with U.S. generally accepted accounting principles (GAAP) following the March 2022 issuance of Accounting Standards Update 2022-02 (ASU 2022-02), Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. ASU 2022-02 eliminated the recognition and measurement accounting guidance for TDRs by creditors upon adoption of Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 326.1 TO THE OFFICER IN CHARGE OF SUPERVISION AT EACH FEDERAL RESERVE BANK SUBJECT: Interagency Policy Statement on Allowances for Credit Losses Applicability:  This letter and the attached interagency policy statement are relevant for Federal Reserve supervised financial institutions,2 including those with less than $10 billion in total consolidated assets, that file regulatory reports prepared in accordance with GAAP.3 The Federal Reserve Board, the Federal Deposit Insurance Corporation, the National Credit Union Administration, and the Office of the Comptroller of the Currency (the agencies) are issuing the attached interagency policy statement in response to changes in the accounting for credit losses under GAAP, as promulgated by the FASB. The interagency policy statement describes the measurement of expected credit losses under the current expected credit losses (CECL) methodology and the accounting for impairment on available-for-sale debt securities in accordance with FASB ASC Topic 326. The interagency policy statement also includes, and updates concepts and practices detailed in existing policy statements on the allowance for loan and lease losses that remain relevant under FASB ASC Topic 326. This interagency policy statement is relevant for an institution when the institution adopts FASB ASC Topic 326.4 For institutions that have adopted the accounting standard, this interagency policy statement replaces the policy statements on the allowance for loan and lease losses attached to the following SR letters: SR letter 06-17, “Interagency Policy Statement on the Allowance for Loan and Lease Losses (ALLL)” 5 SR letter 01-17, “Final Interagency Policy Statement on Allowance for Loan and Lease Losses (ALLL) Methodologies and Documentation for Banks and Savings Institutions” An institution should continue to refer to the policy statements attached to SR letter 06-17 and SR letter 01-17 for relevant information until it adopts FASB ASC Topic 326. Reserve Banks are asked to distribute this letter to the supervised institutions in their districts, as well as to appropriate supervisory and examination staff.  In addition, questions regarding this letter should be sent via the Board’s public website.6 signed by Michael S. Gibson Director Division of Supervision and Regulation Partially Supersedes: SR letter 06-17, “Interagency Policy Statement on the Allowance for Loan and Lease Losses (ALLL)” SR letter 01-17, “Final Interagency Policy Statement on Allowance for Loan and Lease Losses (ALLL) Methodologies and Documentation for Banks and Savings Institutions” Attachments: Interagency Policy Statement on Allowances for Credit Losses  (Revised April 2023) Federal Register notice (preamble and revised interagency policy statement) Cross References: SR letter 20-13, “Interagency Guidance on Credit Risk Review Systems” SR letter 13-19 / CA letter 13-21, “Guidance on Managing Outsourcing Risk” SR letter 11-7, “Guidance on Model Risk Management” SR letter 95-42, “Allowance for Loan and Lease Losses for U.S. Branches and Agencies of Foreign Banking Organizations” SR letter 95-4, “Allowance for Loan and Lease Losses for U.S. Branches and Agencies of Foreign Banking Organizations” Notes: Refer to Accounting Standards Update No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, and subsequent amendments since June 2016. These updates are codified in ASC Topic 326, Financial Instruments – Credit Losses (FASB ASC Topic 326).  Return to text. This includes state member banks, bank holding companies, savings and loan holding companies, Edge Act and agreement corporations, and U.S. branches and agencies of foreign banking organizations (FBOs).  Return to text. U.S. branches and agencies of FBOs may choose to, but are not required to, maintain an allowance for loan losses on an office level. These institutions should refer to the instructions for the FFIEC 002, “Report of Assets and Liabilities of U.S. Branches and Agencies of Foreign Banks,” as well as SR letter 95-4, “Allowance for Loan and Lease Losses for U.S. Branches and Agencies of Foreign Banking Organizations,” and SR letter 95-42, “Allowance for Loan and Lease Losses for U.S. Branches and Agencies of Foreign Banking Organizations.”  Return to text. In accordance with ASU No. 2019-10, FASB ASC Topic 326 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, for public business entities that meet the definition of a Securities Exchange Commission (SEC) filer, excluding entities eligible to be small reporting companies as defined by the SEC. FASB ASC Topic 326 is effective for all other entities for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. For all entities, early application of FASB ASC Topic 326 is permitted as set forth in ASU 2016-13  Return to text. The attached interagency policy statement does not include the “Loan Review Systems” guidance previously contained in Attachment 1 to the Interagency Policy Statement on the Allowance for Loan and Lease Losses (See SR letter 06‑17). The agencies have revised the “Loan Review Systems” guidance and issued it as stand-alone guidance. Refer to SR letter 20-13, “Interagency Guidance on Credit Risk Review Systems.”  Return to text. See http://www.federalreserve.gov/apps/contactus/feedback.aspx.  Return to text. Back to Top Last Update: April 21, 2023 Board of Governors of the Federal Reserve System About the Fed News & Events Monetary Policy Supervision & Regulation Financial Stability Payment Systems Economic Research Data Consumers & Communities Connect with the Board Tools and Information Contact Publications Freedom of Information (FOIA) Office of Inspector General Budget & Performance | Audit No FEAR Act Español Website Policies | Privacy Program Accessibility Stay Connected Federal Reserve Facebook Page Federal Reserve Instagram Page Federal Reserve YouTube Page Federal Reserve Flickr Page Federal Reserve LinkedIn Page Federal Reserve Threads Page Link to Federal Reserve X Page Link to Federal Reserve Bluesky Page Subscribe to RSS Subscribe to Email Board of Governors of the Federal Reserve System 20th Street and Constitution Avenue N.W., Washington, DC 20551 --