Both FASB (Financial Accounting Standards Board) and IASB (International Accounting Standards Board) requested input on their new common impairment model that is based on recording “expected losses” as opposed to the current “incurred losses.” However, this approach only applies to loans evaluated within a portfolio rather than individually. The results could be a double whammy on banks as banks should expect significantly higher ALLL (allowances for loan and lease losses) in addition to the BASEL III higher capital requirements thus meaning little lending capacity. Follow the link to learn more about what the American Bankers Association has posted:
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