Takeaways from the TRG’s First Meeting
**Please check our most recent blog post regarding the latest changes to the FASB deadlines.**
Last week FASB’s new Transition Resource Group (TRG) met for the first time. The group’s assignment is to address ongoing issues that arise around the soon-to-be allowance standard, Current Expected Credit Loss (CECL). The initial meeting on April 1, 2016 included the introduction of the latest version of the standard. Reviews have been mixed.
“While FASB’s revised draft offers more clarity than the original, the devil is in the details,” said Mike Gullette, Vice President with the American Bankers Association. “Community banks will be required in real life to build and maintain data warehouses to support CECL estimates. That hasn’t changed, and significantly more detailed analysis – vastly different than that performed today – will be needed than is pictured in the examples. That hasn’t changed. From a cost-benefit point of view, this still doesn’t work.” (Read Gullette’s entire statement.)
The Independent Community Bankers of America (ICBA) see it differently. “FASB has clearly listened to the concerns of ICBA and the nation’s community banks,” ICBA Vice Chairman Timothy K. Zimmerman said. “The revised standard includes important changes that address concerns with the irreversible damage the CECL model would have had on community bank lending to local consumers. We also need to ensure the regulators and auditors who will implement the standard recognize the significant changes FASB has made.”
While opinions on the latest version of the standard and the work of FASB and the TRG vary, MST’s Chris Emery said he could hear, just faintly, someone singing “Kumbaya”.
“Generally, there seemed to be more agreement with the document in its current version,” Emery observed.
While FASB had already released the timeline for CECL implementation, it was not until the meeting that a release deadline date was named. Per the TRG, the final CECL standard will be released by June 30. As the scheduled release is less than three months away, that’s precious little time for any substantial changes.
During the meeting, it was emphasized that financial institutions will be allowed to choose from a variety of loan loss reserve methodologies to comply with CECL. It was also re-emphasized that regardless of the methodology, extensive historical loan level data will be required.
Clarifying CECL and its impact on banks will be the focus of the presentations of the 2016 MST National ALLL Conference, May 24-26, in La Jolla, California. In response to FASB announcing the CECL release deadline, we have extended the conference registration deadline to April 30. We understand that CECL will have a significant impact on your institution; this year’s annual ALLL conference will arm you with the knowledge and insight you need to develop a successful CECL strategy.