Is It Time for Community Banks to Begin Planning for the Implementation of CECL?
With current expected credit losses (CECL), generally the answer is to wait. Try not to purchase any software or contract with any vendor. The reason being that while CECL will probably be implemented, the “rules” as required by the regulators have not been finalized. And until the regulators agree on how CECL should be implemented, any early decisions made by a bank would be premature.
Office of the Comptroller of the Currency
In April 2021, the Office of the Comptroller of the Currency (OCC) released their handbook for “Allowances for Credit Losses, or ACL”, which pertains to those banks that have already implemented CECL. Those OCC regulated banks which have not implemented CECL must still comply with the handbook pertaining to the “Allowance for Loan and Lease Losses”. The reason for State Banks is that the regulators try to practice uniformity.
Generally, the rules implemented by one regulator usually are adopted by all the regulatory agencies. The ACL handbook is comprehensive at over 100 pages, but at this time it provides the most useful insight into how CECL will be implemented.