from the St Louis Fed
— this post authored by Julie Stackhouse, Executive Vice President
Banks big and small are busy preparing for a new accounting standard, the current expected credit loss model, or CECL. The main goal of the new standard is to ensure that banks are setting aside adequate reserves to cover expected losses on assets.
A few months ago, I examined the reasons for the accounting change and then discussed what banks could be doing to get ready.
This month, I am pleased to announce a new resource designed to help banks prepare for CECL: the CECL Resource Center. This website is responsive to the many requests from community bankers for a “one-stop” resource for information about CECL.
While targeted to bankers, there is plenty of information that may be useful for journalists, industry insiders, and other interested stakeholders. Users of the website will find background information about CECL and its implementation and spreadsheet examples of methodologies appropriate for community banks. They’ll also find resources to help community bankers stay abreast of news, supervisory guidance and relevant research and analysis.
At a high level, the site offers information around the following areas:
Implementation
St. Louis Fed Senior Examiner Larry Sherrer explains the background and objectives of the accounting standard in his essay, Why CECL? This section also covers:
- The basics of CECL – key items to keep in mind as bank transitions to CECL
- Preparing for CECL – data that will be needed to transition, including important definitions
- Key dates – the current schedule for implementation based on the entity type
Resources
This section includes news and updates from the Financial Accounting Standards Board (FASB) and the federal banking agencies, along with research and analysis from the Federal Reserve System, government agencies and private-sector research companies. Visitors can also find supervisory guidance from the FASB, the federal banking agencies, and the Securities and Exchange Commission.
Additionally, users can access relevant webinars from the Federal Reserve and other regulators, preparation advice, and frequently asked questions from accounting organizations and industry trade groups.
Methodologies
Under this tab, you’ll find Excel spreadsheet examples of methodologies that are considered by both standard setters and supervisory agencies as appropriate for smaller and less complex organizations. The CECL standard accommodates various methods. This is intended to allow management to have flexibility in establishing and managing information about loss estimates in a way that best reflects the organization’s credit risk.
Looking Ahead
My hope is that this resource will make the transition easier for community banks. We are committed to keeping the site current. We will also soon release a feature that sends registrants an email whenever the website is updated.
For More Information
Some questions are hard to answer through website resources. In those cases, interested parties can email us at [email protected].
Additional Resources
- On the Economy: Managing CECL Change: How Banks Can Prepare for the New Accounting Standard
- On the Economy: The CECL Model: Accounting Changes Coming for Banks
Note
This post is part of a series titled “Supervising Our Nation’s Financial Institutions.” The series, written by Julie Stackhouse, executive vice president and officer-in-charge of supervision at the St. Louis Federal Reserve, appears at least once each month.
Source
https://www.stlouisfed.org/on-the-economy/2019/december/introducing-cecl-resource-center
Disclaimer
Views expressed are not necessarily those of the Federal Reserve Bank of St. Louis or of the Federal Reserve System.
