Proposed FDIC Rule May Discourage Largest Banks from Offering Loan Modifications

The largest U.S. banks may be less likely to work with customers experiencing financial difficulty through loan modifications under a recent proposed rule from the Federal Deposit Insurance Corp.

A July 20 notice of proposed rulemaking from the FDIC would require banks with $10 billion or more in assets to begin using "modifications to borrowers experiencing financial difficulty" in calculations for their Deposit Insurance Fund assessment rates. The language would replace troubled debt restructurings, or TDRs, in the underperforming assets ratio and higher-risk assets ratio in the scorecards for large and highly complex banks.

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