As most bankers are aware, the implementation date for the new Current Expected Credit Losses (CECL) accounting standard continues to draw nearer. Though the implementation date is still years away for most institutions, the new standard will significantly change the methodology institutions use for estimating future credit losses. To help regulators gauge each institution's CECL-readiness, Department examiners will be joining examiners from the Federal Reserve and the FDIC in assessing each institution's progress during upcoming safety and soundness examinations. As part of this evaluation, examiners will be asking questions such as:
- Is management familiar with CECL and staying up-to-date with regulatory guidance related to CECL?
- Has management determined the effective implementation date for CECL for this institution?
- Who has been assigned responsibility for overseeing CECL implementation?
- Has a committee been formed to facilitate CECL implementation? Ideally, the committee should include members from each functional area.
- Has management discussed CECL implementation with the institution's external auditor?
- Has management identified the data points, reports, and systems that will be needed to provide necessary information to implement migration to a new CECL model?
- Is management retaining the data that will be necessary to support the new methodology? If not, has a plan been developed to begin retaining this data?
- Has management started to evaluate the various methods that may be used to estimate an appropriate Allowance for Credit Losses?
- Has management established an implementation plan and/or timeline?
The Department encourages all bankers to listen to an interagency teleconference on Monday, July 30, 2018, entitled Community Bank Webinar: Current Expected Credit Losses Methodology Q&A Webinar for Community Bankers. Representatives from the FRB, FDIC, OCC, CSBS, FASB and SEC will be providing answers to various CECL questions that have been received from community bankers. Information on this teleconference can be found here: FDIC FIL 34-2018.