The Conference of State Bank Supervisors (CSBS) recently unveiled an optional tool to help financial institutions prepare for new accounting standards that will change how banks calculate credit losses.
CSBS officials said the Current Expected Credit Losses (CECL) Readiness Tool would provide one possible path for financial institutions to use while preparing for the Financial Accounting Standard Board’s (FASB) new accounting rules.
“As financial institutions prepare for FASB’s new accounting update, state regulators have heard community banks express a clear need: a set of steps to help them prepare,” CSBS President and CEO John W. Ryan said. “The steps laid out in this tool provide one possible path that a financial institution’s management team can take to prepare for these changes.”
Officials said the tool was developed to provide a framework that a financial institution could use to plan for the eventual implementation of the accounting changes, encouraging early research, data maintenance, and communication amongst members of a financial institution’s management team.
Using current Generally Accepted Accounting Principles, officials said an institution is restricted in its ability to record credit losses that are expected but do not meet the threshold of probable. Some institutions and stakeholders asked the Financial Accounting Standards Board (FASB) to enhance standards on loan-loss provisioning to incorporate forward-looking data.