CECL standard must remain capital neutral

Author: John Crabb | Published: 21 Aug 2018

The final current expected credit loss (CECL) standards must ensure that any impact is capital neutral if it is to be successful, suggest sources. The new regulation, which changes accounting for credit losses for certain instruments, has come under fire from a number of bank lobbyists since its inception in 2016, who have campaigned to ensure its capital impact is minimised.

A smooth implementation of the standard is certainly possible, if the correct processes and procedures are followed, and sources suggest that making it credit neutral is also achievable.

The Financial Accounting Standards Board (FASB) issued the accounting standards update (ASU) which improves financial reporting by requiring financial institutions and other organisations to report credit losses on loans and other financial instruments in a more timely manner. The standard is due to come into play for Securities and Exchange Commission (SEC) filers for fiscal years beginning after December 15 2019....