Loss accounting rules should not hurt small banks: US regulators

[WASHINGTON] Satisfying new accounting rules for bad loans should not be a burden for small banks, US banking regulators said on Friday.

The Financial Accounting Standards Board this week set a new framework for loan-loss reserves: the formula for how banks should account for bad loans.

The rules were conceived to reduce the likelihood that investors will get blindsided by a sudden deluge of bad loans, as they did during the 2007-2009 financial crisis.

On Friday, bank regulators including the Federal Reserve said there was flexibility in the rules and that small institutions should be spared a costly regulatory hit. "The agencies expect that smaller and less complex institutions will be able to adjust their existing allowance methods to meet the requirements of the new amounting standard without the use of costly and complex models," the regulators said.

REUTERS