NR 96-75
  June 19, 1996
  
         Guidance on Loan Loss Reserves Released by OCC
  
  WASHINGTON, D.C. -- The Office of the Comptroller of the
  Currency (OCC) today released a new Comptroller's Handbook
  section,  Allowance for Loan and Lease Losses (ALLL).  The new
  booklet provides examiner guidance on reviewing how national
  banks establish reserves against probable losses on loans and
  leases and identifies the kinds of risks banks may incur in
  this process.
  
  Maintenance of an adequate ALLL is an integral part of a bank's
  process for managing the credit risk in its loan and lease
  portfolio.  Establishing and maintaining an appropriate ALLL 
  involves compliance risk, because a significantly misstated
  ALLL misrepresents both the earnings and the condition of the
  bank and would constitute a violation of requirements that
  national banks file accurate reports of condition.  The level
  and trends in the ALLL balance are routinely tracked by
  financial analysts, and adverse trends in the allowance level
  could subject a bank to unfavorable commentary, a form of
  reputation risk.
  
  The last changes to the OCC's ALLL examination procedures were
  made in 1992.  This handbook section consolidates a variety of
  ALLL-related materials and identifies the specific categories
  of risk connected with a bank's ALLL.  It makes no changes in
  basic examination objectives and procedures.
  
  All national banks, OCC examiners, and subscribers to the
  Comptroller's Handbook will receive a copy of the Allowance for
  Loan and Lease Losses booklet.  To obtain a copy of this new
  booklet, send a written request along with a check for $15 to
  the Office of the Comptroller of the Currency, P.O. Box 70004,
  Chicago, IL 60673-0004.
  
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  The OCC charters, regulates and examines approximately 2,800 national banks
  and 70 federal branches and agencies of foreign banks in the U.S.,
  accounting for more than half the nation's banking assets.  Its mission is
  to ensure the safety and soundness of the national banking system.