Adopting the current expected credit loss model, or CECL, has been a critical effort at financial institutions over the last few years. Now that it’s implemented, it’s crucial to ensure ongoing compliance and efficient management of the allowance for credit losses (ACL).
Developing this estimate is important enough that a smart approach is to follow some CECL best practices for ongoing management of the ACL. Read on to learn what these practices are and how they can benefit your financial institution.
The recommendations for CECL management described below refer to processes and approaches that have been effective among financial institutions as they have implemented the accounting standard since it became effective for the largest banks in 2020.
They also refer to actions after implementation that have helped financial institutions calculate the allowance for credit losses on an ongoing basis with consistency. They are based on experience directly implementing and running the CECL calculation as well as working with thousands of banks and credit unions to navigate CECL compliance through automation.