Press Release

Nearly Half of Banking Institutions Have Not Formed a CECL Implementation Taskforce

Indirectly affected functional areas should be involved in the CECL implementation process to avoid unintended consequences.

CHICAGO (Sept. 11, 2018) – A flash poll conducted by Baker Tilly Virchow Krause, LLP (Baker Tilly) indicates that nearly 50 percent of community banking institutions have not formed a taskforce for implementing the Financial Accounting Standards Board’s (FASB) Accounting Standard Update (ASU) 2016-13 Financial Instruments (Topic 326) – Measurement of Credit Losses on Financial Instruments. ASU 2016-13 is commonly referred to as the current expected credit loss (CECL) standard.

“There are several segments within banking institutions that will be affected by CECL,” Ivan Cilik, CPA, partner in Baker Tilly’s financial services practice group, commented. “Although CECL is an accounting standard, it is important to ensure professionals outside of the finance department, including underwriting, risk, compliance, and other operational personnel within the bank, are included in the implementation process.”

“The CECL standard requires organizations to consider quantitative and qualitative factors within their institution’s CECL methodology,” Richard Sauerwein, director in Baker Tilly’s forensic, litigation and valuation consulting practice group, said. “By including multiple departments in the implementation process, qualitative factors such as underwriting standard changes, economic and business condition forecasts, new legal and regulatory requirements, and other qualitative considerations that may not be known to the finance and accounting departments can be included in the chosen estimation method.”

Baker Tilly recently held live demonstrations webinars about CECL implementation methodologies, CECL implementation: Virtual workshop on CECL methodology – vintage loss analysis and CECL implementation: Virtual workshop on CECL methodology – loss rate analysis, to assist depository and lending industry professionals that are working to implement FASB’s CECL standard.

The webinars presenters discussed:

  • The data requirements to support the vintage loss analysis and loss rate analysis CECL implementation methods
  • The way data can be manipulated to produce a reasonable and supportable estimate for future defaults and losses
  • The limitations/shortfalls as well as the benefits of the vintage loss analysis and loss rate analysis CECL implementation methods

A recording of the webinars are available at bakertilly.com/insights/cecl-implementation-virtual-workshop-on-cecl-methodology-vintage-loss-analy/ and bakertilly.com/insights/cecl-implementation-virtual-workshop-on-cecl-methodology-loss-rate-analysis/.

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Baker Tilly US, LLP (Baker Tilly) is a leading advisory, tax and assurance firm whose specialized professionals guide clients through an ever-changing business world, helping them win now and anticipate tomorrow. Headquartered in Chicago, Baker Tilly, and its affiliated entities, have operations in North America, South America, Europe, Asia and Australia. Baker Tilly is an independent member of Baker Tilly International, a worldwide network of independent accounting and business advisory firms in 145 territories, with 34,700 professionals. The combined worldwide revenue of independent member firms is $3.6 billion. Visit bakertilly.com or join the conversation on LinkedIn, Facebook and Twitter.