Bank holding companies, in preparing their financial statements, are permitted to use the range of options available under GAAP. In accordance with the Call Report instructions, banks and their consumer finance subsidiaries are required to use the contractual method, which ages loans based on the status of contractual payments. In reviewing consumer finance subsidiaries of banking organizations, examiners should consider the methodology used for aging retail loans. Accordingly, examiners should apply the policy, as appropriate, in the inspection of consumer finance subsidiaries of bank holding companies. While the revised policy, by its terms, applies only to depository institutions, the Federal Reserve believes the guidance it contains is broadly applicable to bank holding companies. Clarification that payments received after the applicable charge-off threshold, but before the end of the month in which the charge-off threshold is triggered, may be considered in determining whether a charge off remains appropriate.Clarification that loans with collateral that are due to be charged off under the policy may be written down to the value of the collateral, less cost to sell, rather than being charged off in their entirety.Any outstanding loan balance in excess of the value of the property, less cost to sell, should be classified Loss and charged off. For loans that are secured by residential real estate, a current assessment of value should be made no later than 180 days past the contractual due date.This re-aging is limited to once in a five-year period, and is in addition to the once-in-twelve-months/twice-in-five-years limitation for other open-end loans. Open-end accounts that enter a debt counseling/workout program may be re-aged after receipt of at least three consecutive minimum monthly payments, or the equivalent cumulative amount.The once-in-twelve-months/twice-in-five years limitations on re-ages of open-end loans is retained. In addition, institutions should establish and maintain comprehensive and effective risk management, reporting, and internal controls to support the collection process and ensure the timely recognition of losses. The explicit limitation on the number and frequency of extensions, deferrals, rewrites, and renewals of closed-end loans is replaced with language that stresses the need for institutions to adopt and adhere to prudential internal standards regarding these practices.1 The revised policy contains several noteworthy changes and clarifications to the February 1999 policy, including the following: The February 1999 policy updated and expanded the classification policy for retail credit loans that was issued in 1980. The Federal Financial Institutions Examination Council has issued a revised Uniform Retail Credit Classification and Account Management Policy (revised policy) that supersedes the policy issued on February 10, 1999 (February 1999 policy). Revised Uniform Retail Credit Classification and Account Management Policy SUPERVISORY AND EXAMINATION STAFF AT EACH FEDERAL RESERVE BANK AND TO EACHĭOMESTIC AND FOREIGN BANKING ORGANIZATION SUPERVISED BY THE FEDERAL RESERVE OFFICER IN CHARGE OF SUPERVISION AND APPROPRIATE FRB: Supervisory Letter SR 00-8 (SUP) on Revised Uniform Retail Credit Classification and Account Management Policy-June 12, 2000

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