CECL proposal gets tepid response at recent roundtable

The Financial Accounting Standards Board’s current expected credit loss (CECL) standard presents significant operational challenges for banks whose resources are already taxed to meet regulatory and reporting requirements. It’s an on-going issue that has received considerable attention and commentary. A recent roundtable, attended by financial industry institution organizations, regulators, users of financial statements, and representatives from banks, credit unions and savings and loan associations, focused on developing an alternative proposal submitted by a group of banks.

The proposed alternative addressed the income statement impact of CECL due to concerns about the reliability of long-term CECL estimates, and would recognize certain expected charge-offs as part of comprehensive income rather than earnings. Attendees generally argued this would significantly change the economics of lending, therefore impacting credit availability, their product offerings and the cost of credit, especially for consumers and small businesses. Bigger banks maintain that a two-tier system would force them to rethink their models, while smaller banks raised concerns about making an already burdensome process even more complex.

FASB staff committed to providing the FASB board with a comprehensive analysis of the meeting later this quarter. FASB is expected to consider the alternative proposal in more detail in March, when a formal vote is expected.

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