The Coronavirus, ALLL, and Liquidity: Assessments and Expectations
In January 2020, most SEC-filing financial institutions began operating under the new current expected credit loss (CECL) accounting standard. While loss provisions were expected to increase due to the new standard, the onset of the economic impact of the coronavirus pandemic also created new implications for financial institutions’ reserves. Reports from the first quarter revealed... Read more »
How the Coronavirus Could Impact CECL, Allowance
The last three months have brought an influx of responsibilities and challenges for bank and credit union CFOs to consider. As if CFOs didn’t have enough to focus on already with reporting tied to financials, asset/liability management, strategic planning, and enhancing the bottom line, the pandemic stormed in as 2020 was off to a solid... Read more »
Credit Loss Modeling Services: COVID qualitative adjustments, Stress Testing, and CECL
Activities from pricing, budgeting, allowance preparation, and stress testing depend on current and forward-looking expectations for the volume and timing of credit losses. Estimating losses in an environment that differs from recent historical experience in a consistent, quantitatively justified manner requires the use of some form of modeling approach. While the application of those models and underlying assumptions vary by activity, the model should still reflect the institution’s best estimate, and should not consider any reliable inputs “off-limits” during development.