ICBA Statement on Comments by Financial Accounting Standards Board Chairman Russell Golden

Dec 10, 2015

Washington, D.C. (Dec. 10, 2015)—Independent Community Bankers of America® (ICBA) President and CEO Camden R. Fine issued this statement on Financial Accounting Standards Board Chairman Russell Golden’s comments on FASB’s accounting standards update for loan-loss reserves.

“The Financial Accounting Standards Board’s proposed revamp to accounting standards would force community banks to raise their loan-loss reserves by a projected 30 to 50 percent, according to federal regulators. This will have a dramatic negative impact on local communities, which rely on hometown community banks for access to much-needed capital.

“Imposing these costly and economically damaging requirements on the community banks and consumers who did not cause the financial crisis—but were indeed badly harmed by the fallout of the Wall Street calamity of 2008-09—is simply bad policy for local economies. By requiring all banks to record a provision for credit losses the moment they make a loan and essentially mandating the use of complex and expensive credit modeling systems, the FASB proposal removes community bankers’ discretion to make localized financial decisions. This is antithetical to the community banking model itself and will lead to lower regulatory capital, fewer loans to consumers and slower economic growth.

“That is why ICBA continues to advocate its alternative plan for institutions with less than $10 billion in assets, which bases loan-loss provisions on historical losses for similar assets. This plan would build necessary allowances for potential losses while removing the principle of recognizing losses on day one, limiting the negative impact on community bank lending.

“ICBA and the nation’s community bankers continue urging FASB to reassess its costly and economically destructive proposal and to consider ICBA’s alternative, which addresses accounting concerns without harming community bank lenders and borrowers.”

About ICBA
The Independent Community Bankers of America®, the nation’s voice for more than 6,000 community banks of all sizes and charter types, is dedicated exclusively to representing the interests of the community banking industry and its membership through effective advocacy, best-in-class education and high-quality products and services.