Here is something helpful that has surfaced amidst the fallout, pain and confusion of the global COVID-19 crisis. The implementation date for the all-too-simple in theory but not-simple-at-all in practice CECL accounting standard has been pushed back by the passage of the CARES Act for banks until the COVID-19 national emergency declared by the president ends or December 31, 2020, whichever is earlier. In addition, an interim final rule released by the FRB, OCC and FDIC on Friday, March 27th, now provides an option to delay the effects of CECL on regulatory capital for two years (in addition to the original three-year transition period for banks required to adopt CECL during their 2020 fiscal year). Banks opting to use both forms of relief would be subject to a modified transition period which would be reduced by the amount of quarters CECL was delayed due to the CARES Act. No relief was provided for non-banks who are otherwise required to follow CECL.
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Regulatory Capital
Beany & CECL
Beany & Cecil was a cartoon. The Current Expected Credit Loss accounting rules, better known as CECL, which the FASB is insisting will go into effect at the beginning of next year for publicly traded banks and lenders and a year later for all other GAAP reporting entities is not. Now, heaven forfend that I suggest that the work of the Financial Accounting Standards Board is cartoonish, but there’s a parallel in this pairing of harmless and obscured menace worth noting.
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Third Party Purchaser Agreements Don’t Destroy Sale Treatment: A Victory for the Unintended Consequences Resistance
Every once in a while we get some good news around the capital markets hood and this is one of those times. Admittedly, all we’re doing here is fixing a problem which was one of the unintended consequences of the Dodd-Frank regulatory regime and just gets us back to where we thought we were before the issue arose, but hey – a victory is a victory.
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HVCRE: Busting Myths
The Trump administration and Congress have lots on the agenda: tax reform, financial regulation reform, job creation (think infrastructure spending, maybe?) and more. While it seems unlikely that much of anything “real” is going to happen anytime soon or even this year (other than more drama, more tweets and more Trump-isms), there’s some hope for a fix for the many failings of the High Volatility Commercial Real Estate (HVCRE) Rule.
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Dodd-Frank Rulemaking Developments by the Fed for Fed-Supervised Insurance Firms
The Dodd-Frank Act was a cornucopia of opportunity for rule writers. To the regulatory community, this was almost a bottomless candy jar. And so our regulatory apparatchiki began to beaver away and produced, to date, something like 22,000 pages of rules which purport to moderate or prevent bad behavior by all those nasty institutions perceived to have some responsibility for the financial crisis of 2008. Curiously, at least, to me, Dodd-Frank included in among its bad boys, those institutions “significantly engaged in insurance activities.” Apparently, our Congressional grandees in the overheated environment of the Great Recession conflated insurance and banking. Hey, they are kind of like financial institutions, and they’re big, or at least some of them are, and are probably filing with nefarious types inclined to go off the reservation and therefore in need of “guidance” from the regulatory community.
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A Trip Through the Labyrinth – The Regulatory Man in Full
And now to return to our commentary a few weeks back about the stultifying impact of ill-thought through rules and regulations (at best) (Brexit has intervened). This is our Regulatory State which broadly attempted to pick winners and losers and modify market behavior, to get an engineered outcome by using the blunderbuss of proscriptive rules and regulation.
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Brushing up on Brexit – Do I Care?
The referendum on whether the UK leaves the European Community is increasingly a Today issue. With a vote on June 23 the reality of a UK exit is getting harder to ignore.
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HVCRE: Surrender Is Not An Option
The way the new Basel III High Volatility Commercial Real Estate Lending Rule (HVCRE) was crafted, and is being enforced, is insane. We’ve written about this before. This is one of the purest examples of the regulatory apparatchik’s mule-headed refusal to look at data or engage with the banking establishment to develop thoughtful and effective rules. I think I saw a thoughtful and effective rule once.
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