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ABA: The American Bankers Association
Position Paper

Disclosures and Discussions of Credit Risk Under CECL

  • Published August 31, 2018

This paper addresses the challenges that bankers, their board members, and their investors will have in analyzing and discussing CECL-based results.

Throughout much of 2018, implementation efforts of the CECL accounting standard have mostly focused on performing narrowly defined calculations and the operational changes (and costs) required therein.
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Significant changes related to data, operational processes, and internal controls will be necessary to estimate the allowance of loan and lease losses (ALLL) at most banks. In addition to the initial calculations based on specific modeling methods, supplemental analyses that address various credit risk factors will also be performed to adjust the initial calculations. Many bankers may then find additional challenges in designing systems that will inform investors and board members of the credit risk inherent in their loan and debt security portfolios and the changes in credit risk that have taken place during the period. This paper, therefore, addresses the challenges that bankers, their board members, and their investors will have in analyzing and discussing CECL-based results.

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