Bank Regulators Ease Accounting for Troubled Debt Modifications

Six banking regulators on Sunday offered accounting relief to banks facing an onslaught of customer requests to extend loan terms or reduce interest rates due to the new coronavirus pandemic.

The agencies said in a joint statement that not all loans modified because of Covid-19 should be considered troubled debt restructurings. The statement matters because modifications that qualify as troubled debt restructurings trigger potentially burdensome accounting requirements under major new loan loss accounting rules.

“The agencies encourage financial institutions to work with borrowers, will not criticize institutions for doing so in a safe and sound manner, and will not direct ...