Proposed FASB Rule Could Force Banks To Boost Reserves

Law360, New York (December 20, 2012, 5:35 PM EST) -- The Financial Accounting Standards Board on Thursday proposed that banks account for their credit risks earlier than is currently required, a change that could force banks to boost their loan-loss reserves by hundreds of millions of dollars.

Under the proposal, banks would be required to move from an “incurred loss” measurement to an “expected loss” accounting of potential risks in their loan portfolios, meaning banks would have to estimate the amount of money they expect to lose on their loans in future earnings reports. Banks currently...
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