The Federal Financial Institutions Examination Council (FFIEC) last week issued a statement setting forth prudent risk management and consumer protection principles for financial institutions to consider while working with borrowers as initial coronavirus-related loan accommodation periods come to an end and they consider additional accommodations.

The agencies, which include NCUA and the Consumer Financial Protection Bureau (CFPB) encourage financial institutions to consider, when appropriate, prudent options for additional accommodations that can ease cash flow pressures on affected borrowers, improve their capacity to service debt, and facilitate the financial institution’s prudent management of its loans, consistent with applicable laws and regulations.

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 that include identifying, measuring, and monitoring the credit risks of loans that receive accommodations;
• Well-structured and sustainable accommodations that help the minimize losses to the financial institution while helping borrowers resume structured, affordable and sustainable repayment amounts;
• Consumer protections that include clear, timely and accurate communications and disclosures that are consistent with applicable law;
• Following all accounting and regulatory reporting requirements, including maintenance of appropriate allowances for loan and lease losses or allowances for credit losses, as applicable; and
• Internal control systems, including 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 financial institution’s activities.