Allowance for Loan and Lease Losses Law and Legal Definition

According to 12 CFR 325.2 [Title 12 -- Banks and Banking; Chapter III -- Federal Deposit Insurance Corporation; Subchapter B -- Regulations and Statements of General Policy; Part 325 -- Capital Maintenance; Subpart A -- Minimum Capital Requirements], allowance for loan and lease losses means “those general valuation allowances that have been established through charges against earnings to absorb losses on loans and lease financing receivables. Allowances for loan and lease losses exclude allocated transfer risk reserves established pursuant to 12 U.S.C. 3904 and specific reserves created against identified losses.”