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Board of Governors of the Federal Reserve System
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Board of Governors of the Federal Reserve System

Supervisory Policy and Guidance Topics

Allowance for Loan and Lease Losses (ALLL)

The purpose of the ALLL is to reflect estimated credit losses within a bank’s portfolio of loans and leases. Estimated credit losses are estimates of the current amount of loans that are probable that the bank will be unable to collect given the facts and circumstances since the evaluation date (generally the balance sheet date). That is, estimated credit losses represent net charge-offs that are likely to be realized for a loan or group of loans as of the evaluation date. The ALLL is presented on the balance sheet as a contra-asset account that reduces the amount of the loan portfolio reported on the balance sheet.
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Policy Letters

Allowance for Loan and Lease Losses (ALLL)

SR 12-3
Interagency Guidance on Allowance Estimation Practices for Junior Lien Loans and Lines of Credit
SR 07-1
Interagency Guidance on Concentrations in Commercial Real Estate
SR 06-17
Interagency Policy Statement on the Allowance for Loan and Lease Losses (ALLL)
SR 06-15
Interagency Guidance on Nontraditional Mortgage Product Risks
SR 05-11
Interagency Credit Risk Management Guidance for Home Equity Lending
SR 04-9
Revised Uniform Agreement on the Classification of Assets and Appraisal of Securities Held by Banks and Thrifts
SR 03-1
Account Management and Loss Allowance Methodology for Credit Card Lending
SR 01-17 (SUP)
Final Interagency Policy Statement on Allowance for Loan and Lease Losses (ALLL) Methodologies and Documentation for Banks and Savings Institutions
SR 01-4 (GEN)
Guidance on Supervision of Subprime Lending
SR 99-22 (SUP)
Joint Interagency Letter on the Loan Loss Allowance
SR 99-13 (SUP)
Recent Developments Regarding Loan Loss Allowances
SR 95-42 (SUP.IB)
Allowance for Loan and Lease Losses for U.S. Branches and Agencies of Foreign Banking Organizations
SR 95-38 (SUP)
Supervisory Guidance Related to FASB Statement No. 114
SR 95-4 (SUP.IB)
Allowance for Loan and Lease Losses for U.S. Branches and Agencies of Foreign Banking Organizations
SR 92-39
Notification to State Member Banks on Federal Reserve Confirmations of Charge-offs Declared for Tax Purposes
 

Additional Resources

 

Manual References

  • Bank Holding Company Supervision Manual
    • Section 2065.2, "Determining an Adequate Level for the Allowance for Loan and Lease Losses (Accounting, Reporting, and Disclosure Issues)"
    • Section 2065.3, "Maintenance of an Appropriate Allowance for Loan and Lease Losses (Accounting, Reporting, and Disclosure Issues)"
    • Section 2065.4, "ALLL Methodologies and Documentation (Accounting, Reporting, and Disclosure Issues)"
  • Commercial Bank Examination Manual
    • Section 2070.1, "Allowance for Loan and Lease Losses"
    • Section 2072.1, "ALLL Methodologies and Documentation"
    • Section 2073.1, "ALLL Estimation Practices for Loans Secured by Junior Liens"

 

Last update: January 23, 2013