The Financial Accounting Standards Board’s current expected credit loss standard presents significant operational challenges and stakeholders are concerned about real and potentially severe economic effects, participants noted at a roundtable discussion hosted by FASB today.
During the discussion, attendees — including ABA member bankers — highlighted that in its current form, CECL would change the economics of lending. They added that the unintended consequences are likely to result in changes to credit availability, product mix and cost of credit, particularly to consumers and small businesses.
Participants also discussed the challenges of implementing an alternative CECL model that would recognize charge-offs on unimpaired loans expected to occur more than twelve months from the balance sheet date into other comprehensive income, rather than earnings. The alternative model was proposed by certain banks that are concerned about the reliability of long-term CECL estimates.
The American Bankers Association has long raised concerns to FASB and to the agencies about CECL’s potential effects for banks. “We continue to strongly believe the standard should be delayed until the banking agencies conduct a quantitative impact study to determine the best way to mitigate those consequences,” ABA President and CEO Rob Nichols said today in response to the roundtable.