CECL: Ready, Set . . . Go?
Regardless of the nuances to be decided and final issues to be resolved, and whether the announcement comes in 2015, 2016, or later, banks’ advisors, including their external accounting and audit vendors, are telling them to begin preparing for the new FASB accounting standard for estimating the allowance, Current Expected Credit Losses (CECL).
“In our view, the single most important of these preparations for banks to begin now is the process of capturing and storing loan-level detail and transactional information on a regular basis,” notes MST’s Director of Special Projects Chris Emery. “Every indication is that historical pool-level data will no longer be acceptable for calculation of loss rates. For many banks, this will mean a lack of necessary data when CECL implementation comes around.”Beyond gathering data, community bankers will want to consider new models and methodologies and test the impact of estimating future losses on capital planning. Advanced planning could even prove CECL a competitive advantage. Above all, bank advisors are telling their clients to begin preparing now. Waiting could put a bank at a severe disadvantage in its marketplace. Download the whitepaper to read in full.