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Financial Institution Letter
Revised Transition of the Current Expected Credit Losses Methodology for Allowances


The Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency, and Board of Governors of the Federal Reserve System (the agencies) have adopted final changes to the capital rule that allow banking organizations that adopt the current expected credit losses (CECL) methodology of estimating allowances for credit losses during the 2020 calendar year to have the option to delay for up to two years an estimate of CECL’s effect on regulatory capital followed by a three-year transition period.

A copy of the Final Rule can be found on the FDIC’s website.

Statement of Applicability to Institutions with Total Assets Under $1 Billion: This Financial Institution Letter (FIL) is applicable to banks that adopt CECL under U.S. generally accepted accounting principles during calendar year 2020.


  • The final rule is consistent with the interim final rule published in the Federal Register on March 31, 2020, with certain clarifications and minor adjustments related to the mechanics of the transition and the eligibility criteria for applying the transition.
  • The final rule provides banking organizations that were required to adopt CECL for purposes of U.S. generally accepted accounting principles for a fiscal year that begins during the 2020 calendar year the option to delay for up to two years an estimate of CECL’s effect on regulatory capital followed by a three-year transition period (the 2020 CECL transition).
  • The final rule would also permit use of the 2020 CECL transition provision by any banking organization that adopts CECL during the 2020 calendar year, including those that early adopt CECL.
  • In addition, the final rule would not require an electing banking organization to apply the transitional amounts in any quarter in which application of the transition provision would result in a reduction in retained earnings.
  • The final rule is effective as of the date of publication in the Federal Register . The 2020 CECL transition provision remains available under the interim final rule prior to that effective date.


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Last Updated: August 26, 2020