Regulators urge lenders to work constructively with borrowers

By Ken Tysiac

Federal regulators issued a revised interagency statement Tuesday urging financial institutions to work constructively with borrowers affected by the coronavirus pandemic and providing additional information regarding loan modifications.

The revised statement was issued by the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the National Credit Union Administration, the Office of the Comptroller of the Currency, and the Consumer Financial Protection Bureau, in consultation with state financial regulators.

The revised statement clarifies the interaction between the interagency statement issued March 22 and the temporary relief provided by Section 4013 of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, P.L. 116-136. This section of the federal coronavirus relief law that was signed March 27 by the president allows financial institutions to suspend the requirements to classify certain loan modifications as troubled debt restructurings.

The revised statement also provides supervisory interpretations on past due and nonaccrual regulatory reporting of loan modification programs and regulatory capital. The agencies are encouraging financial institutions to work with borrowers and said in the statement that they will not criticize institutions for doing so in a safe and sound manner.

Prudent loan modification programs offered to financial institution customers affected by the pandemic are viewed by the regulators as positive and proactive actions that can manage or mitigate adverse impacts on borrowers and lead to improved performance and reduced credit risk, according to the statement.

Examiners for the agencies will exercise judgment in reviewing loan modifications, including troubled debt restructurings, and will not automatically adversely risk rate credits that are affected by the coronavirus pandemic, the statement says. Regardless of whether modifications are considered troubled debt restructurings or are adversely classified, agency examiners will not criticize prudent efforts to modify terms on existing loans for affected customers.

For more news and reporting on the coronavirus and how CPAs can handle challenges related to the outbreak, visit the JofA’s coronavirus resources page.

Ken Tysiac ( is the JofA’s editorial director.

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