Banking Official Flags Costs of Loan Loss Accounting Overhaul

The Federal Reserve’s top bank cop called for small banks to have a carveout from nearly decade-old changes to accounting rules for expected loan losses that were made in the wake of the 2008 financial crisis.

“It has not improved loss recognition or enhanced risk management,” Fed Vice Chair for Supervision Michelle Bowman said Tuesday. “It has imposed unjustifiable costs, especially for smaller institutions.”

Bowman joined investors, company executives, and accounting firm leaders at a public roundtable hosted by the Financial Accounting Standards Board. Under current guidance, banks and businesses must look into the future, take into ...