Alert January 07, 2014

FDIC Releases Videos Designed to Provide Information to Bank Directors, Officers and Employees Regarding Municipal Securities, the Allowance for Loan and Lease Losses, Troubled Debt Restructuring and Fair Lending

The FDIC released four new videos (the “Videos,” and each a “Video”) designed to provide technical assistance to directors, officers and employees of depository institutions that are FDIC insured.  The Videos are available on the FDIC’s website as part of the FDIC’s “Directors Resource Center.”   The four Videos, which were released on December 31, 2013, concern, respectively: (1) municipal securities; (2) the allowance for loan and lease losses; (3) troubled debt restructuring; and (4) fair lending.

The Video concerning municipal securities is focused on the evaluation of municipal securities and supervisory expectations concerning how banks analyze municipal securities prior to purchase, how they monitor holdings of municipal securities on an ongoing basis, and how municipal securities are addressed in the applicable bank’s investment policies.

The Video regarding the allowance for loan and lease losses (“ALLL”) provides assistance to depository institutions on how to develop a methodology to establish an appropriate ALLL.  The FDIC states that the Video “provides an overview of applicable interagency policy statements, discusses pertinent accounting standards, reviews measuring impairment and estimating credit losses, and illustrates an effective loss migration analysis.”

The Video concerning troubled debt restructuring (“TDR”) provides guidance for depository institutions on how to identify a TDR, and the accounting and regulatory treatment of a TDR.  The Video, which provides a number of illustrative examples of TDRs, also explains the “multiple note concept” used in connection with certain TDRs.

Finally, the FDIC’s Video concerning management of fair lending risk discusses the key elements of an effective fair lending compliance management system.  The Video discusses the requirements of the fair lending laws, summarizes the concepts of disparate treatment and disparate impact, reviews fair lending risk indicators and describes what the FDIC believes are effective strategies to mitigate fair lending risk.