By Josh Stein and Mike Gullette
ABA Viewpoint
Josh Stein is VP for accounting policy, and Mike Gullette is SVP for accounting policy, at ABA.
Nearly a decade after the Financial Accounting Standards board issued the current expected credit loss, or CECL, methodology — and three years after community banks were required to adopt CECL — a clear pattern has emerged. CECL has significantly increased ongoing compliance costs without meaningfully improving credit loss estimates.
That experience now matters in a very concrete way. FASB has launched its post‑implementation review of CECL to ask a simple question: is the standard delivering decision‑useful information at a reasonable cost?
This article — the first in a series of three — focuses on what community banks are telling ABA so far and what ABA recently noted to FASB in its April 17, 2026, comment letter: CECL’s costs, driven largely by audit, validation and vendor expectations, have consistently outweighed its benefits.
CECL in practice: lacking flexibility
FASB originally intended CECL to be a principles‑based standard, scalable to the size, complexity and risk profile of individual institutions. In practice, community bankers report that CECL implementation has converged around a narrow set of operational expectations — largely shaped by audit and validation practices rather than by the accounting standard itself.
The result is a disconnect between CECL’s conceptual flexibility and its real‑world application. Banks with straightforward portfolios and strong historical performance are nevertheless expected to maintain systems, controls and documentation far more stringent than under the previous incurred loss approach.
CECL implementation resulted in disproportionate and recurring costs
Community banks emphasize that CECL is not a one‑time implementation cost. Instead, it has introduced significant recurring expenses that persist quarter after quarter, even when portfolios are stable and allowance levels change little.
Key ongoing cost drivers include:
- Third‑party economic forecasts. In a recent ABA community bank member survey, 57% of community banks reported relying on third‑party economic forecasts.
- Vendor and software dependence. The same survey found that 70% use third‑party vendors to manage (or play significant roles in) the CECL estimation process — costs that generally did not exist prior to CECL’s effective date.
- Checklist-driven documentation. Even when banking examiners apply a so-called light touch, auditors often continue to insist on extensive validation and documentation that do not add value commensurate with the time and expense it takes to produce them.
CECL has produced little change in allowance outcomes
Despite the added complexity, CECL has produced little change in allowance coverage levels for core community bank portfolios, particularly commercial real estate, commercial and industrial loans and residential mortgages. This outcome reinforces what many bankers have observed anecdotally: CECL added layers of process and documentation without materially improving the estimates.
As one banker summarized during a recent ABA roundtable: “CECL is a lot more cost for no change in the end result.”
The review process ought to take CECL’s shortcomings seriously
FASB’s review process is not about undoing CECL. However, ABA believes it provides an opportunity to assess whether the standard, as applied, is delivering better information than its predecessor at a cost that makes sense. For community banks, the evidence to date suggests that it is not.
A practical path forward — one that recalibrates expectations while preserving sound risk management — is essential. The review provides a critical forum to begin that conversation, and community bank input will be important to ensure the process reflects how CECL is functioning in practice.
In the next article, we will look more closely at where CECL costs actually come from — and why qualitative factors, validation and audit expectations dominate the burden.
