THE IMPACT OF CECL AND REVISED DATES PROPOSED BY THE FASB FOR SMALL BANKS TO IMPLEMENT IT
THE FINANCIAL CRISIS AND BIRTH OF CECL The 2007-2008 financial crisis triggered a cascade of credit losses for banks. It showed just how inadequate the longstanding method of Allowance for Loan and Lease Losses (ALLL) was for the adjustment of reserve levels of financial institutions. Taking note, on June 16, 2016, the Financial Accounting Standards Board (FASB) formulated Current Expected Credit Loss (CECL) to replace the ALLL standard. The CECL standard brought along with […]
WHAT IS CECL AND WHY WAS IT CREATED?
The 2007-2008 financial crisis and credit loss estimation The financial crisis of 2007-2008 demonstrated the inadequacy of existing methods, for adjustment of reserve levels of financial institutions when considering expectations of future market conditions. ALLL only relied on losses that were already incurred and did not factor in future cash flows that would end up […]
CECL SOLUTIONS FOR SMALLER BANKS AND CREDIT UNIONS
SCALE IS NOT THE ANSWER OR IS SCALE THE ANSWER? Is applying SCALE to the CECL problem the right thing to do for small banks and credit unions? CECL allows banks significant flexibility for their choice of method(s) for estimating potential credit losses for capital provisioning. Banks can apply different ‘Expected Credit Loss’ (ECL) methods […]
