The Financial Accounting Standards Board ("FASB") is considering a new loan-loss reserve model, which would require banks to set up an allowance for estimated losses at loan origination instead of when default is considered probable. Although this new Current Expected Credit Loss ("CECL") model has instilled some fear in community bankers as a result of the potential complex and costly reserve analysis it may bring, it is evident that concerns from bankers are being heard and considered by the FASB before any final decisions or mandates are made. Although many bankers left a February 2016 meeting with the FASB impressed by the teamwork of the FASB and bank regulators, and were also in agreement with the theory behind the change, some bankers left the meeting disgruntled when discussion of community banks' responsibility for the financial crisis was discussed.
For more information or assistance please contact Julie Gorman, Staff Accountant, and member of Marcum's Financial Industry Group.
See article entitled "FASB Loan-Loss Meeting Gets Heated, But Bankers See Progress" written by John Reosti of American Banker for more information.