Conflicting views of the range of likely losses sometimes leads to a perception that the regulatory evaluation of the adequacy of ALLL levels involves something of a “black box.” To further complicate things, the accounting standard generally requires estimation, using statistical analysis, of a bank’s unique past loss patterns, but most community banks have neither the rich data nor the capability to perform such analysis.
Of course, as I cited your own bank’s example, banks had to take a one time hit before shifting the securities from trading to banking book. Different banks, however, vary in their levels of vulnerability, with some new private banks being less susceptible to market risk compared with most old private banks and some government banks.