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What Matters Most – March 2016

In this issue, we highlight the recent regulatory guidance on oil and gas lending.  We also discuss capital under the new Basel III rules, stress test results and audit requirements, and regulatory relief efforts for community banks.  We provide a brief update on the current expected credit loss (CECL) model and lease accounting projects.  Our commentary is in the spirit of March madness and highlights some lessons that can be learned from legendary basketball coach John Wooden.

Oil and Gas Lending

On March 16, 2016, the Office of the Comptroller of the Currency (OCC) released OCC Bulletin 2016-9, Oil and Gas Exploration and Production Lending.  This replaces the previous examination booklet and provides guidance on risks inherent in lending to upstream oil and gas exploration and production companies and provides supervisory guidance on prudent risk management of this activity.  While that booklet focuses on E&P lending, banks may find the guidance on Assigning Regulatory Loan Ratings somewhat useful for downstream and oil and gas service businesses as well. Read More

Capital Adequacy Under Basel III

In 2015, the new Basel III requirements became effective for all banks.  Also in 2015, mid-sized banks, those $10-50 billion, were required to publicly disclose capital stress test results for the first time.  Credit Unions larger than $10 billion were required to submit capital plans to their regulators for the first time in 2015.  The largest financial institutions, those with $50 billion or more in assets, commonly referred to as “systemically important” or “too big to fail”, have been subject to much more comprehensive capital plan and stress testing requirements since 2011. Read More

Regulatory Relief

In 2015, the Dodd-Frank Act had its five year anniversary (Dodd-Frank was signed into law July 21, 2010).  The extent of the regulation and burden on community banks has been well publicized, as well as the improvements in capital and transparency for the largest banks.  Lawmakers and regulators have acknowledged the differences in supervisory expectations of community banks relative to larger banks. Read More

Accounting Projects

In 2015, the FASB announced effective dates for the CECL impairment model and the new lease accounting standard.  As it currently stands, most non-public entities are expected to implement these standards in 2020. Read More

HoganTaylor Commentary – Nobody Better

The end of March and beginning of April brings the NCAA basketball championships and opening day baseball.  For many of you, this also marks the end of reporting season and a much needed break from working nights and weekends.  Easter always brings hope and I am proud and appreciative of the inspirational thoughts and messages from friends and co-workers. Read More