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Federal Reserve Bank of Dallas ROB E RT D. Mc TEER, JR. DALLAS, TE XAS P R E S ID E N T A N D C H IE F E X E C U T I V E O F F I C E R 75265-5906 November 18, 1998 Notice 98-106 TO: The Chief Executive Officer of each financial institution and others concerned in the Eleventh Federal Reserve District SUBJECT Sound Practices for Loan Accounting, Credit Risk Disclosure, and Related Matters DETAILS As part of its ongoing work to improve the transparency of banking organizations, the Basle Committee on Banking Supervision has issued a policy paper entitled Sound Practices fo r Loan Accounting, Credit Risk Disclosure, and Related Matters. Once finalized, the Basle Com mittee policy paper will represent the first comprehensive international supervisory guidance on sound practices for loan loss allowances, accounting for troubled loans, and related credit risk disclosures of banking organizations. The policy paper presents guidance on sound practices through the discussion of 25 principles. The paper provides guidance on sound practices regarding key loan accounting issues, such as the initial recognition and measurement of loans, subsequent measurement of impairment loans, establishment of loan loss allowances, income recognition, and issues relating to troubled debt restructurings. Moreover, the paper presents sound disclosure practices for loan portfolios, troubled loans, loan loss allowances, and related credit risk management practices. The paper concludes with a brief discussion of the role of supervisors in assessing a bank’s management of asset quality and the adequacy of loan loss allowances. The Basle Committee has requested public comment on the paper. Comments must be received by March 15, 1999. The Basle Committee’s press release and paper can be obtained from the Internet at <http://www.bis.org>, or from the Basle Committee Secretariat, Bank of International Settlements, Centralbahnplatz 2, CH-4002, Basle, Switzerland. For additional copies, bankers and others are encouraged to use one of the following toll-free numbers in contacting the Federal Reserve Bank of Dallas: Dallas Office (800) 333-4460; El Paso Branch Intrastate (800) 592-1631, Interstate (800) 351-1012; Houston Branch Intrastate (800) 392-4162, Interstate (800) 221-0363; San Antonio Branch Intrastate (800) 292-5810. This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) MORE INFORMATION For more information, please contact Dorsey Davis at (214) 922-6051. For additional copies of this Bank’s notice, contact the Public Affairs Department at (214) 922-5254. Sincerely yours,
@FedFRASER