ABA Banking Journal
No Result
View All Result
  • Topics
    • Ag Banking
    • Commercial Lending
    • Community Banking
    • Compliance and Risk
    • Cybersecurity
    • Economy
    • Human Resources
    • Insurance
    • Legal
    • Mortgage
    • Mutual Funds
    • Payments
    • Policy
    • Retail and Marketing
    • Tax and Accounting
    • Technology
    • Wealth Management
  • Newsbytes
  • Podcasts
  • Magazine
    • Subscribe
    • Advertise
    • Magazine Archive
    • Newsletter Archive
    • Podcast Archive
    • Sponsored Content Archive
SUBSCRIBE
ABA Banking Journal
  • Topics
    • Ag Banking
    • Commercial Lending
    • Community Banking
    • Compliance and Risk
    • Cybersecurity
    • Economy
    • Human Resources
    • Insurance
    • Legal
    • Mortgage
    • Mutual Funds
    • Payments
    • Policy
    • Retail and Marketing
    • Tax and Accounting
    • Technology
    • Wealth Management
  • Newsbytes
  • Podcasts
  • Magazine
    • Subscribe
    • Advertise
    • Magazine Archive
    • Newsletter Archive
    • Podcast Archive
    • Sponsored Content Archive
No Result
View All Result
No Result
View All Result
ADVERTISEMENT
Home Community Banking

As CECL Looms, Prepare for Board Discussions

March 11, 2019
Reading Time: 3 mins read
ADVERTISEMENT

By Debra Cope

As the implementation date for Current Expected Credit Loss (CECL) draws near, discussions about the implications of the new loan impairment standard will inevitably move into the boardroom.

When that happens, the focus of the conversation will shift from accounting mechanics and the credit performance of the loan book to broader issues, including the financial management and performance of the bank, Larry Sorensen, CFO of Washington Trust Bank, Spokane, Wash., said during a recent ABA webinar. Loan committees and chairs should be positioned to play a role to facilitate the discussions.

During the webinar, Sorensen played the role of a CFO in a mock board meeting to discuss CECL. He was grilled throughout the session by three “directors” played by Mike Gullette, American Bankers Association SVP for tax and accounting; Laura Beth Butler, CFO of First Citizens National Bank, Dyersburg, Tenn.; and Paula S. King, senior adviser with Abrigo, a provider of compliance, credit risk, and lending solutions based in Austin, Texas.

This article originally appeared in the March/April 2019 issue of ABA Banking Journal Directors Briefing. Subscribe now.
The webinar (available at aba.com/CECL4BankBoards) offers insights regarding questions board members may want to ask about CECL. “It is designed to put some practical perspectives on the concepts that we’ve been thinking about,” Gullette said.

Topics covered during the mock board meeting include why CECL might trigger volatility in earnings and capital; how it will impact loan terms and products; how budgeting and strategic planning will be affected; the need for contingency planning; how to mitigate any negative impact on earnings; expense reduction strategies, and the need to achieve cohesive forecasting across the bank’s analytical and financial management activities.

“We’ve been so entrenched with technical aspects of CECL,” King said. “This will give us some takeaways for interaction with a board group.”

The Financial Accounting Standards Board adopted CECL in June 2016, in response to the global financial crisis. The essence of CECL is that it scraps the ”incurred-loss” accounting framework that has been in place for 40 years. Instead of accounting for incurred losses in loan portfolios, banks will have to take a longer view and make predictions about future expected losses over the life of a portfolio.

The new accounting standard is slated to take effect in 2020 for banks under Securities and Exchange Commission registration and 2021 for all other banks, though early application is permitted beginning in 2019.

Teeing up the board discussion, Gullette noted that CECL is a fundamental change because it replaces the longstanding incurred-loss framework for loans with a “life of loan loss” expectation, which places heavy emphasis on economic forecasting and reliance on historic averages as the basis for analysis.

Gullette noted that there have been efforts, including by ABA, to postpone implementation of some portions of CECL. However, he said, a change in mindset is already underway. “No matter what happens, we are definitely going to be in an environment that is forward looking, and that’s what CECL is,” he said.

In addition to the webinar, ABA has developed background and training materials to help boards and management prepare for the CECL standards. Resources include a background paper, webinars and an active online community with 750 members. Learn more at aba.com/cecl.

 

Tags: CECLCredit riskDirectorsLoan loss accountingRegulatory capital
ShareTweetPin

Author

Debra Cope

Debra Cope

Debra Cope is editor-in-chief of ABA Banking Journal Directors Briefing.

Related Posts

Is deepfake technology shifting the gold standard of authentication?

Will fraud prevention ever be autonomous?

Technology
June 17, 2025

Anti-fraud systems are learning to anticipate fraud rather than merely react to it. Better anticipatory abilities inch systems closer to full automation.

New infographics provide advice for identifying money mules, check fraud

Banking agencies seek public comment on strategies to combat payments fraud

Compliance and Risk
June 16, 2025

The FDIC, Federal Reserve and OCC issued a request for comment on potential actions to help consumers, businesses and financial institutions mitigate risks related to payments fraud, particularly check fraud.

CFPB claims ‘complex’ pricing drives up cost of financial products

ABA, associations reiterate concerns about CFPB nonbank registry

Compliance and Risk
June 16, 2025

ABA joined two associations in reiterating their concerns about the CFPB’s nonbank registry, which the current bureau leadership has proposed to eliminate.

Republican AGs criticize hiring of OCC climate risk officer

Basel Committee issues voluntary climate disclosure framework

Compliance and Risk
June 16, 2025

Reflecting significant pushback from both ABA and U.S. banking agencies, the Basel Committee last week issued a framework for voluntary disclosure of climate-related financial risks for large international banks.

A Risk Manager’s Guide to the Reference Rate Transition

Credit-sensitive Libor replacements still seek traction

Commercial Lending
June 16, 2025

Looming volatility and recent developments may give AXI and Ameribor a boost

Old ways in a new world of banking

Old ways in a new world of banking

Community Banking
June 13, 2025

Meet American Bankers Council chair Jim Ryan, chairman and CEO of Old National Bank.

NEWSBYTES

Banking agencies seek public comment on strategies to combat payments fraud

June 16, 2025

ABA urges CFPB to preserve streamlined mortgage relief option

June 16, 2025

Illinois pushes back implementation date for state interchange fee law

June 16, 2025

SPONSORED CONTENT

AI Compliance and Regulation: What Financial Institutions Need to Know

Unlocking Deposit Growth: How Financial Institutions Can Activate Data for Precision Cross-Sell

June 1, 2025
Choosing the Right Account Opening Platform: 10 Key Considerations for Long-Term Success

Choosing the Right Account Opening Platform: 10 Key Considerations for Long-Term Success

April 25, 2025
Outsourcing: Getting to Go/No-Go

Outsourcing: Getting to Go/No-Go

April 5, 2025
Six Payments Trends Driving the Future of Transactions

Six Payments Trends Driving the Future of Transactions

March 15, 2025

PODCASTS

Podcast: Old National’s Jim Ryan on the things that really matter

June 12, 2025

Podcast: What bankers need to know about ‘First Amendment audits’

June 5, 2025

Podcast: Accelerating banking for quick-service restaurants

May 8, 2025
ADVERTISEMENT

American Bankers Association
1333 New Hampshire Ave NW
Washington, DC 20036
1-800-BANKERS (800-226-5377)
www.aba.com
About ABA
Privacy Policy
Contact ABA

ABA Banking Journal
About ABA Banking Journal
Media Kit
Advertising
Subscribe

© 2025 American Bankers Association. All rights reserved.

No Result
View All Result
  • Topics
    • Ag Banking
    • Commercial Lending
    • Community Banking
    • Compliance and Risk
    • Cybersecurity
    • Economy
    • Human Resources
    • Insurance
    • Legal
    • Mortgage
    • Mutual Funds
    • Payments
    • Policy
    • Retail and Marketing
    • Tax and Accounting
    • Technology
    • Wealth Management
  • Newsbytes
  • Podcasts
  • Magazine
    • Subscribe
    • Advertise
    • Magazine Archive
    • Newsletter Archive
    • Podcast Archive
    • Sponsored Content Archive

© 2025 American Bankers Association. All rights reserved.