Lawmakers have passed a $2 trillion stimulus package (section 4014 of the CARES Act), which includes an option to delay CECL through 2020. While the intent is to make sure banks can help their clients survive through the health crisis, it could put a more significant strain on bank resources.
For the SEC Filers that were scheduled to report under CECL at quarter-end, they have been granted a delay of 3 quarters before they will be required to go live with CECL. Until then, however, they will report the allowance according to the current Incurred Loss guidance which means it’s time to dust off your old ALLL and PCI models.
While this may seem beneficial to many, the reality is that banks will be running multiple processes and managing several systems throughout the delay. For the next year, the industry will report according to ALLL and current PCI accounting guidance, while also preparing, measuring, and analyzing the impacts of CECL and PCD accounting. There are modifications, concessions, and additional disclosures that will prove time-consuming as well.
In a time when business is a bit discombobulated, and both personal and business impacts strain resources, this may prove more difficult and costly than its original intent.
Is your financial institution taking the delay? Yes No
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