Internal Control Considerations for the Allowance for Loan and Lease Loss Calculation

By now most financial institutions have a solid understanding of the
revised methodology for the Allowance for Loan and Lease Losses
(ALLL) as required by Financial Institution Letter 06-105:
Interagency Policy Statement on the Allowance for Loan and Lease
Losses (FIL 06-105) released in December 2006. For most
community financial institutions, calculating the ALLL requires
significant time and resources to meet these Interagency
requirements. Although your calculation may conform with FIL 06-
105 today, an evaluation should be completed of the internal controls
surrounding the calculation to ensure your calculation continues to
conform with FIL 06-105 and that your calculation is accurate and
well supported.

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