Request for Public Comment on Proposed Policy Statement on Allowance for Loan and Lease Losses Methodologies

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Federal Reserve Bank Of Dallas

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Federal Reserve Bankll★Kof DallasDALLAS, TEXAS 75265-5906September 22, 2000Notice 2000-57TO: The Chief Executive Officer of eachfinancial institution and others concernedin the Eleventh Federal Reserve DistrictSUBJECTRequest for Public Comment onProposed Policy Statement on Allowance forLoan and Lease Losses Methodologies and Documentation forBanks and Savings InstitutionsDETAILSThe Board of Governors of the Federal Reserve System, the Federal Deposit Insur-ance Corporation, the Office of the Comptroller of the Currency, and the Office of Thrift Super-vision have requested public comment on a proposed policy statement for banks and savingsinstitutions. The proposed policy, titled Allowance for Loan and Lease Losses (ALLL) Method-ologies and Documentation, was developed in consultation with the Securities and ExchangeCommission staff.Specifically, the proposal• Clarifies that the board of directors of each institution is responsible for ensuringthat controls are in place to determine the appropriate level of the ALLL;• States that the ALLL process must be thorough, disciplined, and consistentlyapplied and must incorporate management’s current judgments about the creditquality of the loan portfolio;• Emphasizes the banking agencies’ long-standing position that institutions shouldmaintain and support the ALLL with documentation that is consistent with theirstated policies and procedures, generally accepted accounting principles (GAAP),and ...

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