On July 13, the Bank Policy Institute (BPI) filed a comment letter with the U.S. banking agencies in response to their proposal to implement the current expected credit loss methodology (CECL) into their capital and Dodd-Frank Act Stress Testing (DFAST) rules. BPI’s comment letter (i) urges the Agencies to implement a capital neutral approach for CECL for purposes of all capital requirements (including stress capital requirements), (ii) strongly supports the Agencies’ proposal of a transitional arrangement by which the “day one” impact of the adoption of CECL would be phased in over a period of years, (iii) suggests that the FRB consider the collective effects of CECL into CCAR and the proposed stress buffer requirements and delay initial incorporation of CECL into CCAR until at least the 2021 stress testing cycle, and (iv) offers a range of suggestions regarding the proposed transitional arrangement and a quantitative impact study on the anticipated effects of CECL that we urge the agencies to conduct.
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