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TakeFive: FOMC Deploys Crisis Tools

In the latest edition of Take Five with Bill Emmons, recorded Friday, March 20, Dr. Emmons discusses the Federal Open Market Committee’s (FOMC’s) March 3 and 15 policy statements, offering his views on the economy and the FOMC’s decision to reduce the fed funds target rate.

3/20/2020 Read more about FOMC Deploys Crisis Tools

Banks serving hemp producers no longer have to automatically fill out reports used to detect money laundering activities. This reduction in regulatory burden can be traced to the 2018 farm bill (officially titled the Agriculture Improvement Act of 2018), which legalized hemp by removing it as a Schedule 1 controlled substance. Properly licensed industrial hemp producers can now be treated the same as other bank commercial customers for anti-money-laundering regulatory purposes.

Originally published as part of the "On the Economy Blog". This post is part of a blog series titled “Supervising Our Nation’s Financial Institutions."

Last month, I reviewed a new accounting standard for banks called the current expected credit loss model, dubbed CECL. The financial crisis made it apparent that the current methodology for credit loss reserves fell short.

CECL is designed to improve the quality of financial information, especially approaching and during times of economic stress.

Gearing Up

The new accounting standard is being phased in, beginning in 2020 with the nation’s largest publicly traded banks. A recent proposal by rulemakers will defer transition for most other institutions—such as community banks and credit unions—until January 2023.1

Information provided by community banks about CECL preparation indicate that most have started the implementation process by gathering and analyzing data. Some have gone further by selecting a methodology and testing it.

Despite the progress, many bankers continue to express concerns about the transition. These concerns typically center on the time required to prepare, vendor fees, the time and effort needed to obtain and organize data, and even the uncertainty of knowing if they have “gotten it right.”

Originally published as part of the "On the Economy Blog". This post is part of a blog series titled “Supervising Our Nation’s Financial Institutions."

We are more than a decade removed from the financial crisis—a time when many factors converged to threaten the viability of our financial system. Since then, numerous reforms have been implemented. Today, our banking system is substantially stronger and more resilient.1 

Financial regulators have introduced many of those reforms. But other groups have acted as well, including the accounting community through the Financial Accounting Standards Board (FASB). The FASB has recognized the need for change in how firms account for losses in assets held at amortized cost on the balance sheet. The result is a new accounting standard: the current expected credit loss (CECL) model.

Upcoming Programs & Events

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Take Five is a popular video series featuring St. Louis Fed economist Dr. Bill Emmons. In each video, Emmons provides a quick, concise synopsis of the most recent meeting of the Federal Open Market Committee (FOMC).

In order to maintain consistent two-way communications throughout the COVID-19 pandemic, the St. Louis Fed is launching a weekly teleconference series for all state member banks in the Federal Reserve’s Eighth District.This teleconference will be offered as part of the St. Louis Fed’s Conversations with the St. Louis Fed program. Leadership from the St. Louis Fed’s Supervision Division will participate in the call each week. All calls will be archived as downloadable audio files on the Conversations website:
The first call will take place from 11:30 a.m. to noon CT on Friday, March 27. Subsequent calls will be offered every Friday from 11:30-12:00 p.m. CT. Calls are being limited to ½ hour in order to maximize participation each week.