Circular
Policy Statement on Allowance for Loan and Lease Losses (ALLL) Methodologies
July 18, 2001
Circular No. 11366

To All State Member Banks and Bank Holding Companies in the Second Federal Reserve District:

The Board of Governors of the Federal Reserve System has issued a Supervision and Regulation Letter (SR letter 01-17) regarding a new Federal Financial Institutions Examination Council (FFIEC) "Interagency Policy Statement on Allowance for Loan and Lease Losses Methodologies and Documentation for Banks and Savings Institutions." In general, the interagency policy statement clarifies the agencies' expectations on documentation that supports the ALLL methodology. Additionally, the statement emphasizes the need for appropriate ALLL policies and procedures, which should include an effective loan review system. The guidance also provides examples of appropriate supporting documentation as well as illustrations of how to implement this guidance. The policy statement is intended to supplement, not replace, the guidance in the Interagency Policy Statement on the ALLL issued in December 1993 (SR letter 93-70) and does not change GAAP.

Questions on the matter may be directed to your relationship specialist at this Bank.