Jump to Content
ABA: The American Bankers Association
Issue

Current Expected Credit Loss Standards (CECL)

Compliance and Operational Challenges with the Current Expected Credit Loss Standard

ABA Position

The Financial Accounting Standards Board’s Current Expected Credit Loss impairment standard – which requires “life of loan” estimates of losses to be recorded for unimpaired loans -- poses significant compliance and operational challenges for banks. Issued in June 2016, and set to take effect in 2020 for large SEC registrants (2023 for all other banks), the new standard represents the most sweeping change to bank accounting ever.

While initially requested by worldwide banking agencies to decrease procyclicality in the banking industry, banks and other financial companies are finding—through the testing of their estimation models—that CECL would actually increase procyclicality and perhaps significantly. By increasing procyclicality into the banking system, CECL will cause economic downturns to be more severe and to last longer. This will increase the cost and decrease the availability of credit, especially to consumers and to those borrowers of non-prime credit quality or those who rely on loans with longer terms. It also increases the challenge for banks to manage their capital and investors to assess bank performance. As a result, ABA has called for FASB, banking regulators, and the SEC to perform a quantitative impact study to better understand the problem and to assess measures to mitigate the unintended consequences.

The “life of loan” credit loss concept also presents operational complexities that can significantly increase costs at banks of all sizes. ABA is a thought-leader in CECL and publishes discussion papers related to CECL implementation concepts, provides other CECL-related resources, holds periodic CECL conference calls, and also sponsors the ABA CECL Network, a 1,000+ member-only group-site for banks to exchange ideas and to discuss key CECL implementation issues.

Show MoreShow Less

10:23

Video

Current Expected Credit Loss (CECL) Accounting Standard

Related Training & Events

  • CECL Finish Line – Model Risk Management & Model Validation

    Recorded Webinar | June 30, 2022

    Join this webinar with Abrigo’s Neekis Hammond, CPE and KPMG’s Joe Bielecki as they discuss the merits of model validation and alternative controls.

  • CECL Implementation Best Practices – A Discussion with Community Banks

    Recorded Webinar | March 1, 2022

    Most community banks with assets under $1 billion will implement CECL in 2023. But, where to start? Peter Albero, EVP and CFO of Salisbury Bank, and Candace L. Richardson, internal audit manager and CECL officer for Security State Bank, share their recent CECL implementation strategies. The discussion will also include time for FAQs about the implementation process from CECL experts.

  • Jump-Start Your 2023 CECL Adoption

    Recorded Webinar | February 8, 2022

    Haven't adopted CECL yet? Kickstart your implementation with this FREE special event.

  • Roadmap to CECL for 2023 Filers

    Recorded Webinar | November 2, 2021

    In this webinar, Abrigo's Neekis Hammond, CPA, and BKD's Kevin Ives, CPA, will discuss an actionable roadmap and timeline for 2023 adopters.

View All
close-video-modal

Our Experts

Mike Guillette

Michael Gullette

Senior Vice President, Tax & Accounting

Contact Michael
Josh Stein

Josh Stein

Vice President, Accounting & Financial Management

Contact Josh

Press Contact

Blair Bernstein

(202) 663-5468

Contact Blair

Stay Connected

CECL Network

The CECL Network is an online space for ABA members to come together, share and learn the best ways to implement the Current Expected Credit Loss (CECL) standard.

CFOs Email Bulletin

Get timely information for busy chief financial officers delivered as news warrants. (Bank members only)