With the Current Expected Credit Loss standard for loan loss accounting coming into effect for many banks — and the vast majority of bank assets — on Jan. 1, 2020, where are bank CFOs and managers in the process of implementing CECL, and what challenges are they seeing? ABA accounting experts Michael Gullette and Joshua Stein provide a CECL update on the latest issue of the ABA Banking Journal Podcast. In this episode, Gullette and Stein explain:
- How CECL — which requires “life of loan” estimates of losses to be recorded for unimpaired loans at origination or purchase — may affect bank capital, and thus banks’ capacity to lend
- The untested performance of CECL in a stressed economic environment
- How forecasting uncertainty is already affecting longer-maturity loans, including to consumers
- The challenge of retrieving and formatting data and translating forecasts into financial statements
- How regulators and auditors are expected to address CECL — and why any regulatory flexibility provided may not be available under audit
If you can’t see the audio player above, click here to listen to this week’s episode.