CECL: A CEO’s role in improved management of credit losses
There is a reason regulatory agencies are directing their guidance on the new current expected credit loss (CECL) model to the attention of financial institution CEOs. After all, it is top management’s responsibility at the end of the day to ensure the allowance for loan and lease losses (ALLL) is adequate.
Institutions must consider succession planning when they prepare for the ALLL. If an institution has one person responsible for the process, it may not be repeatable should that person step down. The process should be well-documented from start to finish, and there are certainly other ways to ensure the continued soundness of a bank or credit union’s ALLL process by “institutionalizing” the calculation.