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How do additional loan accommodations, beyond the initial modification period, for borrowers continuing to experience financial difficulty as a result of COVID-19 impact accounting and regulatory reporting requirements?
On August 3, 2020, the FFIEC, on behalf of its members issued a joint statement to provide prudent risk management principles for financial institutions to consider while working with borrowers as loans near the end of the initial loan accommodation periods provided during the COVID-19 event. The statement also addresses issues relative to accounting and regulatory reporting and internal control systems.
- In accordance with U.S. GAAP and regulatory reporting instructions, management should consider the effects of external events, such as the COVID-19 event, in its allowance estimation processes.
- Internal controls for initial and additional accommodation periods include quality assurance, credit risk review, operational risk management, compliance risk management, and internal audit functions that are commensurate with the size, complexity, and risk of a financial institution’s activities.
FFIEC Joint Statement on Additional Loan Accommodations Related to COVID-19 https://www.ffiec.gov/press/PDF/Statement_for_Loans_Nearing_the_End_of_Relief_Period.pdf