Noting the lack of guidance for community banks related to the CECL accounting standard, the American Bankers Association today wrote to the financial regulatory agencies advising them to request a delay of the standard’s implementation until such guidance is issued. The recommendation is one of three detailed in an ABA discussion paper that criticizes the Weighted Average Remaining Maturity (or “WARM”) estimation method that has been a point of focus in agency webinars.
ABA warned that WARM estimates are more complex, require more work and are less accurate than other known CECL estimation methods. Due to CECL’s complexity, ABA also asked regulators to urge FASB to allow a “practical expedient” to record and maintain “through the cycle” loss rates in lieu of emphasizing WARM. As a part of the expedient, the agencies would provide relevant credit loss information directly to banks for their use in CECL.