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Federal Register / Vol. 86, No. 36 / Thursday, February 25, 2021 / Rules and Regulations Schedule RCR, Part I, item 2.a. In addition, such an electing bank must report the applicable portions of the transitional amounts under the 2019
CECL rule or the 2020 CECL rule in the affected Call Report items during the transition period. For example, an electing bank would add the applicable portion of the CECL transitional amount or the modified CECL transitional amount when calculating the amount of retained earnings it would report in Schedule RCR, Part I, item 2, of the Call Report.37
In calculating certain measures used in the scorecard approach for determining deposit insurance assessments for large or highly complex banks, under the final rule the FDIC will remove a specified portion of the CECL
transitional amounts added to retained earnings under the transitions provided for under the 2020 and 2019 CECL rules.
Specifically, in certain measures used in the scorecard approach for determining assessments for large or highly complex banks, the FDIC will remove the applicable portion of the CECL
transitional amount or modified CECL
transitional amount added to retained earnings for regulatory capital purposes Call Report Schedule RCR, Part I, Item 2, attributable to the allowance for credits losses on loans and leases held for investment and included in the amount reported on the Call Report balance sheet in Schedule RC, item 4.c.
However, large or highly complex banks that have elected a CECL
transition provision do not currently report these specific portions of the CECL transitional amounts in the Call Report. Thus, implementing the finalized amendments to the risk-based deposit insurance assessment system applicable to large or highly complex banks requires temporary changes to the reporting requirements applicable to the Call Report and its related instructions.
These reporting changes have been proposed and are being effectuated in coordination with the other member entities of the FFIEC.38 As previously described, changes to reporting requirements for large or highly complex banks pursuant to this final rule will be required only while the temporary relief is reflected in banks regulatory reports.
E. Expected Effects The final rule removes the applicable portions of the CECL transitional amounts added to retained earnings for regulatory capital purposes and attributable to the allowance for credit 37 See 38 85

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losses on loans and leases held for investment from certain financial measures used in the scorecards that determine deposit insurance assessment rates for large or highly complex banks.
Absent the final rule, this amount would be temporarily double counted and could result in a deposit insurance assessment rate for a large or highly complex bank that does not accurately reflect the banks risk to the DIF, all else equal. Furthermore, the double counting could result in inequitable deposit insurance assessments, as a large or highly complex bank that has not yet implemented CECL or that does not utilize a transition provision could pay a higher or lower assessment rate than a bank that has implemented CECL and utilizes a transition provision, even if both banks pose equal risk to the DIF.
The FDIC estimates that the majority of large or highly complex banks affected by the double counting are currently paying a lower rate than they would absent the final rule. However, the FDIC
also estimates that a few banks are currently paying a higher rate than they otherwise would pay if the issue of double counting is corrected. The FDIC
estimates that the rate these latter banks are paying is higher by only a de minimis amount, and occurs where the double counting on the loss severity measure more than offsets the effect of double counting on the other scorecard measures that are calculated using the sum of Tier 1 capital and reserves.
Based on FDIC data as of September 30, 2020, the FDIC estimates that this double counting could result in approximately $55 million in annual foregone assessment revenue, or 0.047
percent of the DIF balance as of that date. This estimate includes the majority of large or highly complex banks that are paying a lower rate due to the double counting and the few banks that are paying a higher rate absent correction of double counting.
The FDIC expects that absent this final rule, the estimated amount of foregone assessment revenue would increase as additional large or highly complex banks adopt CECL, to the extent those large or highly complex banks elect to apply a transition. Absent the final rule, the FDIC expects that this amount of foregone assessment revenue also may increase as large or highly complex banks electing the 2020 CECL rule include in their modified CECL
transitional amounts an estimate of CECLs effect on regulatory capital, relative to the incurred loss methodologys effect on regulatory capital, during the first two years of CECL adoption. As of September 30,
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2020, the FDIC estimates that 109 of 139
large or highly complex banks had implemented CECL, and that 94 had elected a transition provided under either the 2019 CECL rule or the 2020
CECL rule. As banks phase out the transitional amounts over time, the assessment effect also will decline. As described previously, the optional temporary relief from CECL afforded by the CARES Act and as extended by the Consolidated Appropriations Act, 2021, and the transitions provided for under the 2019 CECL rule and 2020 CECL rule, provide that all banks will have completely reflected in regulatory capital the day-one effects of CECL
plus, if applicable, an estimate of CECLs effect on regulatory capital, relative to the incurred loss methodologys effect on regulatory capital, during the first two years of CECL adoption by December 31, 2026, thereby eliminating the double counting effects from the scorecard for large or highly complex banks. These above estimates are subject to uncertainty given differing CECL implementation dates and the option for large or highly complex banks to choose between the transitions offered under the 2019 CECL
rule or the 2020 CECL rule, or to recognize the full impact of CECL on regulatory capital upon implementation.
The final rule could pose some additional regulatory costs for large or highly complex banks that elect a transition under either the 2019 CECL
rule or the 2020 CECL rule associated with changes to internal systems or processes, or changes to reporting requirements. It is the FDICs understanding that banks already calculate, for internal purposes, the portion of the CECL transitional amount or modified CECL transitional amount added to retained earnings for regulatory capital purposes that is attributable to the allowance for credit losses on loans and leases held for investment. As such, the FDIC
anticipates that the addition of this temporary item to the Call Report would not impose significant additional burden and any additional costs are likely to be de minimis.
IV. Effective Date of the Final Rule The FDIC is issuing this final rule with an effective date of April 1, 2021, and applicable to the second quarterly assessment period of 2021 i.e., April 1
June 30, 2021. Based on this effective date, the temporary effects of the double counting of the applicable portions of the CECL transitional amounts in select financial measures used in the scorecard approach for determining assessments for large or highly complex banks will
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