The Federal Financial Institutions Examination Board (FFIEC) released a statement stating the prudent risk management and consumer protection principles that financial institutions should consider when working with borrowers as the initial coronavirus-related loan accommodation periods come to an end and consider additional amenities.
The agencies, which include the NCUA and the Consumer Financial Protection Bureau (CFPB), are encouraging financial institutions to consider, where appropriate, prudent options for additional accommodations that could ease cash flow pressures on affected borrowers, to improve their capacity to repay their debt and to facilitate financing. prudent management of its loans by the institution, in accordance with applicable laws and regulations.
The FFIEC recommends the following risk management and consumer protection principles for financial institutions to work with borrowers in a safe and sound manner:
- Prudent Risk Management Practices which include the identification, measurement and monitoring of the credit risks of loans that benefit from an accommodation;
- Well-structured and sustainable accommodation that help minimize financial institution losses while helping borrowers reclaim structured, affordable, and sustainable repayment amounts;
- Consumer protections that include clear, timely and accurate communications and disclosures that comply with applicable law;
- Complying with all accounting and regulatory reporting requirements, including maintaining appropriate provisions for loan and lease losses or provisions for credit losses, as applicable; and
- Internal control systemsincluding quality assurance, credit risk review, operational risk management, compliance risk management and internal audit functions that are commensurate with the size, complexity and risk of the activities of the financial institution.