NCUA issues ALLL guidance with federal banking agencies, SEC

WASHINGTON-Together with the other federal banking regulators and the Securities and Exchange Commission, NCUA recently issued Allowance for Loan and Lease Losses (ALLL) guidance. The guidance Interpretive Ruling and Policy Statement is a follow up on a proposed version issued in October 2001. The ALLL guidance includes the following: * clarifies that each credit union board is responsible for ensuring that controls are in place to determine the appropriate level of the ALLL; * states that the ALLL process must be thorough, disciplined, and consistently applied, and incorporate management’s current judgments about the credit quality of the loan portfolio; * emphasizes NCUA’s long-standing position that credit unions should maintain and support the ALLL with documentation consistent with stated policies and procedures, generally accepted accounting principles (GAAP), and applicable supervisory guidance; and * provides guidance on maintaining and documenting policies and procedures that are appropriately tailored to the size and complexity of the credit union and its loan portfolio. The guidance also provides many useful examples in setting up credit unions’ ALLL and a summary of applicable GAAP guidance with a bibliographical listing of relevant GAAP materials. Credit unions with less complex lending activities may combine some procedures so long as “consistent and appropriate methodology” is maintained.