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2013 vs. 2014 Polls: How much will the CECL model impact allowance levels?

February 24, 2014
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**The FASB issued the final CECL standard on June 16, 2016. For up-to-date information and resources, access the updated CECL Prep Kit.

During a webinar last week on the FASB’s CECL model, Sageworks consulting staff and CliftonLarsonAllen’s Todd Sprang discussed why waiting for the changes may cost banks and credit unions. This is largely because the new model will be based on expected losses, and institutions will need to gather, archive and compute significantly more data compared to current requirements.

All of this is likely to have a significant impact on the allowance. The OCC’s Thomas Curry mentioned at last year’s AICPA conference that the CECL model could increase reserve levels by as much as 30-50 percent. But what do bankers think?

During last week’s webinar, almost 400 bankers were polled to understand their thoughts on the impact of the CECL model. Almost one year ago, just over 250 bankers were asked the same question. Comparing the two sets of results, the popularity of each answer has remained consistent. But there has been a shift among the anticipated increase amount. Now, more bankers are expecting the allowance to increase by 10-50 percent compared to 2013.

CECL Poll Results

Overall, it is clear that almost all bankers are expecting the CECL model to increase reserve levels by up to 50%.

For more on how to prepare for the FASB’s CECL model, download the FASB Preparation Kit. This kit contains valuable resources, such as whitepapers, archived webinars and infographics.

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