Banking & Capital Markets Coronavirus Resources
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Banking & Capital Markets Coronavirus Resources
The banking and capital markets industry is responding to the needs of their customers during the COVID-19 crisis. But many questions have surfaced as to how they should respond to certain situations, what resources are available in this rapidly changing environment, and how to ensure they are complying with the most current regulations. We have compiled some common concerns and considerations, along with the current answers.
Loans/allowance for loan loss
- Short-term modifications made on a good faith basis in response to COVID-19 to borrowers who were current prior to any relief, are not TDRs. This includes short-term (e.g., six months) modifications such as payment deferrals, fee waivers, extensions of repayment terms or other delays in payment that are insignificant.
- Modifications of loan terms do not automatically result in TDRs.
- Past due reporting – With regard to loans not otherwise reportable as past due, financial institutions are not expected to designate loans with deferrals granted due to COVID-19 as past due because of the deferral.
- Nonaccrual status and charge-offs – During the short-term arrangements discussed in this statement, modified/restructured loans generally should not be reported as nonaccrual. As more information becomes available indicating a specific loan will not be repaid, institutions should refer to the charge-off guidance in the instructions for the Consolidated Reports of Condition and Income.
Allowance for loan loss (ALL) consideration of qualitative factors and changes for the first quarter (March 31, 2020)
- Unemployment rates – expected to increase significantly with March 2020 employment report due out in early April (and further April employment report due out in May before 10-Q is filed)
- Concentration risks of commercial loans affected due to COVID-19 shutdown and further governor-ordered shutdowns or “stay-at-home” orders for “nonessential businesses” (e.g., construction loans, C&I loans, etc.)
- Enhanced disclosures related to loan customers requesting payment deferrals due to COVID 19 (i.e., number of loan modifications due to COVID 19, loan segments impact, concessions granted, impact on interest income due to payment deferral, modified loans due to COVID 19 that are still accruing interest, etc.)