ICBA proposes needed changes to CRE guidance update

ICBA issued a comment letter expressing support for an agency effort to provide clearer guidance on prudent commercial real estate loan accommodations and workouts while suggesting improvements to the proposal.

Agency Proposal: The FDIC and OCC proposal would update a 2009 interagency policy statement on working with creditworthy borrowers during times of financial stress. It would incorporate:

• Recent policy guidance on short-term loan accommodations.

• Revisions to reflect accounting developments for estimating loan losses.

• Revised and additional examples of CRE loan workouts and accommodations.

ICBA Comments: In addition to supporting updates that will promote clear guidance to community banks while memorializing current practices, ICBA suggested:

• Clarifying regulatory expectations on updating financial and collateral information for distressed borrowers.

• Clarifying that “market conditions” should be primarily informed by trends within local markets.

• Requiring examiners to supply empirical data if a bank and its experts disagree with regulators about adjustments to collateral valuation.

Fed Update: The Federal Reserve Board last week invited comment on identical updates to its guidance, with a 60-day comment period.