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#29689 - 08/27/02 06:01 PM Allowance for Loan & Lease Loss
NancyF Offline
100 Club
NancyF
Joined: Dec 2001
Posts: 173
PA

My next big internal audit will be of ALLL. Other than rereading regulatory and SEC guidance, does anyone have any suggestions? Does anyone have a audit program they are willing to share? I have not checked Banker's Tools yet, will do that next.

Thanks in advance.

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Audit
#29690 - 08/27/02 06:33 PM Re: Allowance for Loan & Lease Loss
DebNP Offline
100 Club
DebNP
Joined: Oct 2001
Posts: 179
Eastern PA and NJ
I usually start with the regulatory guidance, such as recent issuances of OCC, FRB, FFIEC etc. paying attention to recent issuances from our primary regulator. Most of the examiner handbooks have a good internal control questionnaire that you could use to get started and then structure the program around the risks. I don't know if you do both commercial and retail, but don't forget the Uniform Retail Credit Classification guidance issued I believe in June 2000. Also on 7/2/01, the FFEIC issued its long awaited Policy Statement on ALLL. You'll want to make sure that the relationships between FAS 5 and FAS 114 are appropriate. FAS 5 states you can only establish a Loan Loss Reserve for losses that have actually occurred in the loans you have today. FAS 114 measures the impairment according to the loan contract. Also most recently, the OCC issued its Handbook - Bank Advisory Accounting Series which has alot of guidance on Loans. Some of the topics include Troubled Debt Restructuring, Non-accruals, Recoveries and Charge Offs, as well as Allowance for Loan Losses. You will want to review the your loan policy on ALLL and make sure it reflects what is happening.

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