Thursday, March 13, 2014

Surveyed Banks Expect 50 Percent Increase In Loan Loss Allowances Under New FASB Model

From Sageworks, "Survey: Bankers Expect Higher Credit-Loss Reserves:"
U.S. banks and credit unions, preparing for proposed changes to how they must estimate credit losses, anticipate they’ll eventually need to boost allowances for loan and lease losses by up to 50 percent, according to a new survey by Sageworks, a financial information company.

Among more than 300 bankers surveyed during a webinar, 87 percent said they expect an increase of up to 50 percent to these rainy-day type funds under a credit-loss model proposed by the Financial Accounting Standards Board, the independent body responsible for establishing generally accepted accounting principles. Only about 11 percent of those surveyed expected no impact to the reserve if the board adopts the leading proposal.
Survey participants were volunteers drawn from those attending a webinar hosted by Sageworks on the FASB’s proposed changes. About half of the webinar participants represented banks and credit unions with assets of less than $500 million, and 36 percent represented institutions with assets topping $1 billion. The remaining 16 percent had total assets between $500 million and $1 billion.

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