Published March 23, 2020

Regulators Weigh-In—Guidance for Financial Institutions on Loan Modifications Associated With COVID-19

The Board of Governors of the Federal Reserve System (or Federal Reserve Board, FRB), the Federal Deposit Insurance Corporation (FDIC), the National Credit Union Administration (NCUA), the Office of the Comptroller of the Currency (OCC), the Consumer Financial Protection Bureau (CFPB), and the State Banking Regulators (the Agencies), have issued an Interagency Statement (the Statement) to provide guidance for financial institutions that are working with their customers to provide relief from the effects of COVID-19. The Statement addresses the following:

Working with Customers – The Agencies are encouraging financial institutions to work with their customers who are or may be unable to meet their contractual payment obligations because of the effects of COVID-19, and they have indicated they will not criticize financial institutions that mitigate credit risk through prudent actions consistent with safe and sound practices (i.e., the Agencies believe such proactive actions are in the best interest of the institution).

Accounting for Loan Modifications – The Agencies have confirmed with the Financial Accounting Standards Board that short-term modifications made on a “good faith” basis in response to COVID-19 for borrowers who were current prior to any relief, are not troubled debt restructurings.

Past-Due Reporting – Financial institutions are not expected to designate as “past due” those loans with short-term deferrals granted due to COVID-19.

Nonaccrual Status and Charge-Offs – During the short-term arrangements associated with the deferral of payments discussed in the Statement, these loans generally should not be reported as a nonaccrual loan.

Discount Window Eligibility – Loans that have been restructured as described in the Statement will continue to be eligible as collateral at the FRB’s discount window.

If you have any questions related to the Statement or any other issues your financial institution may be experiencing related to COVID-19, contact one of our PYA executives below at (800) 270-9629.

Disclaimer: To the best of our knowledge, this information was correct at the time of publication. Given the fluid situation, and with rapidly changing new guidance issued daily, be aware that some or all of this information may no longer apply. Please visit our COVID-19 hub frequently for the latest updates, as we are working diligently to put forth the most relevant helpful guidance as it becomes available.

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