Pending CECL Delay Should Not Put Off Preparations, Regulators Say

With a pending proposal by the Financial Accounting Standards Board to delay the Current Expected Credit Loss standard’s implementation deadline to 2023 for certain institutions, top accounting officials at federal agencies warned banks not to “rest on their laurels” when it comes to implementing CECL. Rather, banks should use that additional time for forecasting, parallel runs, establishing or modifying internal controls and “generally integrating the results of CECL into business processes,” FDIC Chief Accountant Robert Storch said yesterday at an American Institute of CPAs conference.

While institutions have made progress toward implementing the CECL standard, Storch noted that about a third of smaller community institutions have yet to develop an implementation plan, he noted. Among the larger publicly traded banks that must comply by 2020, OCC Chief Accountant Sydney Menefee noted that some are “behind their own schedules” in terms of model development and validation, but added that this is not “expected to impact [their]readiness” by the 2020 effective date. The need for more time for banks of all sizes is one of many factors driving the American Bankers Association’s continued advocacy for a delay in CECL implementation.

ABA has for years raised numerous concerns about the procyclical nature of the CECL standard and its potential to negatively affect credit availability in an economic downturn. The association has called on FASB to extend its proposed delay to all banks. The association continues to advocate for bipartisan legislation introduced in both the House and Senate that would halt the implementation of CECL until a quantitative impact study can be conducted.