Banks have had to alter their operations as a result of the coronavirus pandemic.

Accounting rule in force

Many banks already have started to adjust their earnings lower, reflecting a new accounting standard that requires them to estimate credit losses over the lifetimes of their loans, not just as losses accrue.

It’s a big change that will require executives to factor in future losses under various scenarios and incorporating many factors.

As Bank of America explained it, these factors can include changes in unemployment rates, real estate prices, Gross Domestic Product, corporatebond spreads, long-term interest-rate forecasts, the competitive landscape, regulations, lending policies and more, along with prior experience with pastdue loans.

For the first quarter of 2020, Chase, Wells Fargo and Bank of America included roughly $17 billion in combined provisions or charges for credit losses, well above the $3 billion or so that they had reported one year earlier and explaining much of the profit erosion. The new loss provisions reflect not just the accounting-rule change but also lower interest rates and the gloomy economy ushered in by the pandemic.

Few delays ahead

No wonder FDIC Chairman McWilliams in a March 19 letter asked the Financial Accounting Standards Board to let banks delay implantation of the new rule for credit losses.

Most publicly-traded banks were required to adopt it at the start of 2020. However, when the pandemic hit and Congress and the White House enacted the CARES Act in late March, banks were given the option to delay, said Christine Klimek, a spokeswoman for the nonprofit Financial Accounting Foundation, which oversees the accounting board.

To her knowledge, only about three dozen small banks that were subject to the new rule have opted to delay.

Incidentally, if the economy rebounds quickly, as many observers expect, those credit-loss charges could be lowered, improving the profitability outlook.

Banks adjust to new reality

Banks, like most other businesses, have had to alter their operations as a result of the coronavirus pandemic.

For example, Western Alliance Bancorp, the largest banking company headquartered in Arizona and the No. 4 bank overall for deposits in the state, said it has made many adjustments, including eliminating business travel, requiring employees to work from home if they can, forming a COVID-19 business-continuity task force and offering flexible loan-repayment options where appropriate.

That’s in addition to tighter underwriting standards and limited newloan issuance to businesses in higherrisk industries including transportation, travel, lodging, entertainment and retail.

Many banks have reduced hours, closed certain branches, restricted access to safe-deposit boxes or taken other actions that have proven unpopular with some customers.

All of these disruptions might provide a good opportunity to re-evaluate your bank.

Has the company cut its business hours or closed branches to your annoyance? Do you find the website and smart-phone apps easy to use?

Does the bank charge fees for overdrafts, low balances or other reasons? Are interest rates on credit cards or other loans reasonable?

Can you earn a few more pennies in interest by going elsewhere?

Most customers don’t need to worry about the safety of their money, even if bank profits decline. On up to $250,000 in deposits at an insured bank, your money is fully protected against loss by the FDIC (similar coverage applies at credit unions).

This basic insurance amount can be expanded if you own different types of accounts, such as retirement and nonretirement money. It’s also easy to augment coverage beyond the $250,000 limit by simply moving some money to another institution.

But customer satisfaction looms as a factor, especially now that more people are forced by social distancing to conduct most or all of their transactions online.

“With fewer customers visiting branches, it will be important for retail banks to replace the in-person service they would have provided with personalized services delivered instead through digital channels,” said Paul McAdam, a senior director at J.D. Power.

In the researcher’s latest bankingsatisfaction report in late April, digital-only customers described themselves as less satisfied than those who visit branches periodically — or at least, used to do so.