The current expected credit loss model, or CECL, represented a huge shift in how institutions calculate credit losses. Transitioning to it was a major undertaking, particularly for community banks with limited resources. As a result, Fed examiners asked them to make a "good faith effort" when setting allowance estimates when the model was first adopted two years ago.
However, as this article points out, the Fed recently stated that executives should further refine and continuously improve their data and processes for CECL, suggesting greater scrutiny going forward.
How has your institution managed the transition to CECL? What calculation methods are you using to estimate credit losses? Have you experienced any benefits from the shift, such as stronger controls?
Finally, be sure to check out these resources from the OCC on the (somewhat new) standard.
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Rob Blackwell
Chief Content Officer and Head of External Affairs
IntraFi
Arlington, VA
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