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Financial Institutions Services Advisory - Panel Points to Dodd Frank and TDRs as Major 2012 Issues

Monday, September 26, 2011 - Frank Gonzalez, CPA/CFF

Frank Gonzalez

Compliance with the Dodd-Frank Act and accounting for Troubled Debt Restructurings (TDRs) will be among important issues for banks late this year and in 2012, according to bank executives and accountants who participated in a panel discussion on September 21.

The South Florida Banking Institute sponsored the Bank Accounting Update in Miami. Frank Gonzalez, a principal in the Audit Department at MBAF-ERE and head of the firm's Financial Institutions and SEC practices, was the moderator. He is President of the South Florida Banking Institute for 2011-2012.

Topics discussed included:

  • All banks during the next two years will need to comply with a series of rules, including higher capital ratios, that regulators have issued or will issue under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.

    It is anticipated that added costs and time for compliance could lead some banks to seek new investors or an acquisition. Private equity firms can be expected to show selected interest in those transactions with Florida banks.
  • All foreign banks' agencies and branches must comply with the Dodd-Frank systemic risk rules, which for U.S. banks apply only to holding companies with $50 billion or more in assets.

    Requirements include periodically providing a so-called "living will" to the Federal Reserve, with the company's plan for rapid and orderly resolution in the event of material financial distress or failure. Some foreign bank offices in Florida have limited resources, even with the support of parent banks, and could find it costly and difficult to prepare required information.
  • Because the numbers of impaired loans likely will remain high, some bankers in 2012 will continue to have questions about when restructurings should be accounted for as TDRs.

An Accounting Standards Update (ASU) that the Financial Accounting Standards Board (FASB) issued in April 2011 provides clarity, including determination of when a concession on the interest rate or other terms of a loan requires treatment as a TDR.

If you would like additional information on the topics discussed at the South Florida Banking Institute meeting or on other accounting issues for banks, do not hesitate to contact our Financial Institutions specialists or call us at 1-800-239-1474.