ABA to SEC: ‘Guide 3’ Update Should Leave Out CECL-Specific Disclosures

While generally welcoming the Securities and Exchange Commission’s proposed updates to “Guide 3,” the American Bankers Association on Monday urged the SEC to allow more time before adding disclosures specific to the Current Expected Credit Loss model. ABA has long called on the SEC to update Guide 3—the three-decade-old disclosures that financial institution registrants are required to provide to investors—but said that required disclosures of credit metrics should be delayed until banks’ CECL accounting practice is fully developed.

“CECL is intended to provide flexibility to the preparer to develop the best estimate of expected losses,” ABA said. “The industry needs time to develop new disclosures in order to communicate most appropriately to their investors, including how best to explain period-to-period changes in expected credit losses, considering loan mix and volume, credit performance related to expectation, changes in key inputs and assumptions or other factors.”

ABA also identified other technical areas for improvement in the proposal, including flexibility on disaggregation levels in average balance reporting and the definition of uninsured deposits.