Banks Buying Troubled Loans Get Break From Part of Accounting Rule

Banks that buy batches of troubled loans can take into account the potential for the borrowers to turn around on their payments when they tally total loan losses, U.S. accounting rulemakers said.

The Financial Accounting Standards Board Nov. 26 published a narrow update to its current expected credit losses (CECL) accounting standard, the sweeping new rule that goes into effect for large banks in 2020 and is considered the biggest change to bank accounting in decades.

The move is expected to take the sting out of the rule for banks that buy portfolios of what are called purchased ...