The Federal Reserve proposes to counter the capital-sapping effects of a new accounting regime for bank loans with a series of changes to regulatory capital rules.

The proposal, issued on April 13, would permit allowances under the incoming current expected credit loss (CECL) accounting methodology to count as Tier 2 regulatory capital, as well as introduce a three-year transitional period to phase-in the day-one impact on banks’ capital ratios.

CECL, which enters into force in 2020, will alte

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The week on Risk.net, September 15–21, 2018