March 24, 2020 - Barack Ferrazzano Client Alert

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Client Alert: Bank Regulatory COVID-19 Guidance – Takeaways On Working With Borrowers & TDRs

How Does It Affect Your Bank?

Action Items

• Review our In-Depth: Bank Regulatory COVID-19 Loan Guidance Takeaways.
• Review each Borrower’s request for deferral or modification on a case-by-case basis.
• Document your bank’s due diligence in your loan files.
• Consult with your bank’s accountants about treatment of any loan deferrals or modifications.
• Ensure your loan deferral and modifications agreements follow developing regulatory guidance, and proceed accordingly.

We hope you and your colleagues, customers, and families are staying safe during these unprecedented times.

In the last two weeks, banking regulators have issued statements and other guidance directing banks to work with their borrowers in a “safe and sound manner,” but without providing specific guidance. We’ve discussed these in recent Client Alerts, which can be found below under "COVID-19 Resources."

This week, regulators released the Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus¹ (the “Interagency Statement”). That statement and the FAQs the FDIC issued last week² provide more specific guidance. However, as events unfold over the following weeks and months, we anticipate that regulators will be updating their guidance, and it is critical for banks to stay on top on that guidance and proceed accordingly to avoid regulatory concerns.

Takeaways From COVID-19 Guidance

Our key takeaways from the Interagency Statement and the FAQs cover the following categories. Click here to review each in detail: www.bfkn.com/in-depth-covid-19-bank-regulatory-guidance

• Payment Accommodations

• Documenting Your Loan Files
• Troubled Debt Restructurings (TDR)
• Policies & Procedures Did Not Change For:
  
  • Nonaccrual Status
  • Allowance For Credit Losses (ACL)
  • Allowance For Loan & Lease Losses (ALLL)
  • Charge-Offs

We Can Help You

Regulatory guidance and expectations on loan deferrals and modifications in the current COVID-19 environment are evolving rapidly, along with potential legislative proposals. Banking regulators have stated their expectations that banks should “work” with their borrowers, rather than strictly enforce loan terms. Banks must, however, proceed cautiously, and in a safe and sound manner.

To do this, banks must critically review their lending policies and procedures, and then move forward with a carefully crafted approach. We can help you address these issues, prepare your loan modification and deferral documents, and coordinate with your accountants to stay abreast of rapidly evolving regulatory guidance and expectations.

COVID-19 Resources

We strongly recommend you evaluate the following pandemic-related business and legal considerations that we have been discussing with our clients:

• Financial Institutions Group's COVID-19 Resource Center

¹https://www.fdic.gov/news/news/press/2020/pr20038a.pdf
²https://www.fdic.gov/coronavirus/