2 more strategic CECL concerns
Expect volatility during a downturn and get ready to shift your measures of success.
Numerous articles and presentations at conferences are focused on the data that will be needed to forecast expected life of loan credit losses under the Financial Accounting Standards Board’s new current expected credit loss guideline. While the data component of CECL is very important, in this article we’ll explore two major—and unexpected—takeaways gained by participants, including representative of some of the largest credit unions in the industry, in two invitation-only CECL workshops we held in the summer of 2017.
For an examination of a third key takeaway, read “Look Beyond the Data” from the July issue of Credit Union Management magazine.
The first of the two unexpected takeaways we’ll explore here is:
“I didn’t know CECL could cause so much volatility in our financials during an economic downturn….”
Under CECL, credit unions must tie their forecasts of expected lifetime credit losses to “reasonable and supportable” economic forecasts.
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