During its meeting on July 17, 2019, the Financial Accounting Standards Board voted to issue various proposals that could delay the CECL implementation date for most community banks and credit unions. The FASB’s two-pronged proposal collapses the segmentation of entity types from three to two and extends the implementation date for all entities other than larger SEC filers to interim periods after January of 2023. The chart below summarizes the current and proposed CECL implementation timeline.

 

My institution has been collecting data and conducting parallel runs. What should I do now?

Many institutions have been working diligently preparing for CECL. These efforts have included data gathering, model purchase or development, and side-by-side parallel runs with existing ALLL calculations. For these institutions, we recommend:

  • Continue data gathering and storage efforts.
  • Continue annual parallel runs for the next 2-3 years and then quarterly parallel runs 4-6 quarters prior to implementation.
  • Continue refining CECL model and stay on top of industry best practices.

 


 

My institution is still in the beginning stages of CECL preparation. What should I do now?

It should be noted that this new proposal doesn’t eliminate CECL; it simply delays the implementation.  This should give institutions more than ample time to build a robust database of historical data.  Institutions should continue to educate themselves on CECL calculation methodologies and determine if an in-house model can efficiently be built or whether an outsourced vendor should be engaged, or third-party software should be purchased.   Then, annual parallel runs should be performed for the next 2-3 years followed by quarterly parallel runs 4-6 quarters before the 2023 implementation date.

If you would like to speak with one of our CECL consultants about your specific situation, please contact us.  For more information about ProBank Austin’s CECL AdvisorPRO® services, please click here..