CAN THE CALL REPORT BE USED ALONE TO GENERATE CECL?
CECL AND CALL REPORTS The Financial Accounting Standards Board (FASB) issued the Current Expected Credit Losses methodology (CECL), a new accounting standard for estimating allowances for credit losses. This new accounting standard applies to all banks, credit unions, and savings associations that file regulatory reports, which conform to the Generally Accepted Accounting Principles (GAAP) of […]
IDENTIFYING ISSUES – THE NEED TO STORE ALL DATA USED FOR ANALYSIS
HISTORICAL DATA AND CECL Most financial institutions have, by now, developed a Current Expected Credit Losses (CECL) implementation plan. If any institution is lacking a comprehensive historical data set, they need to start focusing on gathering data in order to use bottom-up historical loss data effectively in the future. Relevant historical loss data helps The […]
IDENTIFYING ISSUES – HISTORIC COMPARISONS BETWEEN REPORTING PERIODS
CECL IMPLEMENTATION In June 2016, the Financial Accounting Standards Board (FASB) issued the Current Expected Credit Losses (CECL) accounting standard. CECL focuses on estimating expected losses over the life of the loan. CECL’s effective date has been rescheduled from January 2022 to January 2023 for non-public companies, and from January 2021 to January 2023 for […]
PROBABILITY OF DEFAULT – POOL VS CREDIT SCORE
PROBABILITY OF DEFAULT (PD) UNDER CECL Most financial institutions, such as banks and credit unions, regard the Probability of Default/Loss Given Default (PD/LGD) technique as a reliable method for determining suitable reserve levels in an institution’s loan and lease loss allowance. The PD/LGD method has quickly become the preferred one in the Financial Accounting Standards […]
Q-FACTORS – THE SECRET SAUCE FOR EVERY US INSTITUTION
Q FACTORS UNDER CECL Most financial institutions in the U.S. were left wondering about the fate of their qualitative factors, also known as Q factors, under the Current Expected Credit Losses (CECL) standard when it was issued by the Financial Accounting Standards Board (FASB) in 2016. Bankers, faced with a 2023 CECL implementation date, wonder […]
