ABA Urges Regulators to Consider Costs, Benefits of CECL

ABA in a letter today urged the federal banking regulators to take an active part in the Financial Accounting Standards Board’s cost-benefit analysis of the proposed Current Expected Credit Loss model for loan impairment accounting. The association called for a robust analysis that would go beyond what satisfies the minimum requirements for performing a CECL estimate and include what will most likely be used by banks in real life with respect to gathering data, making forecasts and auditing. ABA believes this will involve significant and ongoing investment by banks of all sizes.

ABA also called for regulators to reconsider regulatory capital requirements, noting that the uncertainty surrounding the long-term forecasts required by CECL may require additional capital buffers. “Such buffers could significantly reduce the amount of capital a bank may deploy to its local community,” the letter said.

FASB is expected to complete its cost-benefit analysis in the coming weeks, and—if approved—issue the final standard this summer.