Assessments Determination After Removal of Double Counting of the Current Expected Credit Losses (CECL) Methodology from the Optional Regulatory Capital Transitions

Updated 01/05/2021

This tool summarizes the FDIC’s proposed rule that removes double counting of CECL transitional amounts from determinations of certain regulatory capital for the purposes of further determining the deposit insurance risk-assessment rate. The following are key takeaways of the changes:

  1. The proposed rule only applies to large and highly complex banks.
  2. The double counting issue arises when CECL transitional amounts are included in Tier 1 capital and reserves for the purposes of the FDIC risk-assessment rate determination.
  3. The proposed rule revises determinations made in the Scorecard to remove the CECL transitional amounts from the reserve calculation in the: (1) Credit Quality Measure; (2) Concentration Measure; and (3) Loss Severity Measure.
  4. The proposed rule does not make any changes to the 2019 or 2020 CECL Rules.
  5. The FDIC will not make retroactive adjustments to prior quarterly assessments that may have over or understated the deposit insurance risk-assessment rate.

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