FED announced that it will soon release a new tool to help community banks implement the Current Expected Credit Losses (CECL) accounting standard. Known as the Scaled CECL Allowance for Losses Estimator or SCALE, the spreadsheet-based tool draws on publicly available regulatory and industry data to aid community banks with assets of less than USD 1 billion in calculating their CECL allowances. FED will launch the SCALE tool and answer questions during an "Ask the Fed" webinar on July 15, 2021. The session is intended for community banks and will feature participation from FASB and the Conference of State Bank Supervisors. Following the Ask the Fed session, the SCALE spreadsheet-based tool will be available on the CECL Resource Center page.
The SCALE method leverages industry or peer data from the Call Report as the starting point for estimating an allowance for credit losses. Banks must further adjust this starting point to reflect bank-specific facts and circumstances to arrive at a final CECL estimate. Introduced by FASB in 2016, the CECL methodology was effective for most public financial institutions beginning in 2020 and most community banks with assets under USD 1 billion will implement CECL in 2023. According to the FED Governor Michelle W. Bowman, "The SCALE tool responds directly to one of the consistent concerns I've heard from across community banks—navigating the complexity of complying with CECL. I'm confident smaller banks will find this tool greatly simplifies that work and provides a practical solution to this important compliance challenge."
Related Link: Press Release
Keywords: Americas, US, Banking, CECL, SCALE, Community Banks, IFRS 9, Equivalent, FASB, FED
Previous ArticleESRB Report Reviews Macro-Prudential Policy in EU
The European Banking Authority (EBA) proposed implementing technical standards on the interest rate risk in the banking book (IRRBB) reporting requirements, with the comment period ending on May 02, 2023.
The U.S. Federal Reserve Board (FED) set out details of the pilot climate scenario analysis exercise to be conducted among the six largest U.S. bank holding companies.
The Board of Governors of the Federal Reserve System (FED) adopted the final rule on Adjustable Interest Rate (LIBOR) Act.
The European Central Bank (ECB) published an updated list of supervised entities, a report on the supervision of less significant institutions (LSIs), a statement on macro-prudential policy.
The Hong Kong Monetary Authority (HKMA) published a circular on the prudential treatment of crypto-asset exposures, an update on the status of transition to new interest rate benchmarks.
The European Commission (EC) adopted the standards addressing supervisory reporting of risk concentrations and intra-group transactions, benchmarking of internal approaches, and authorization of credit institutions.
The China Banking and Insurance Regulatory Commission (CBIRC) issued rules to manage the risk of off-balance sheet business of commercial banks and rules on corporate governance of financial institutions.
The Hong Kong Monetary Authority (HKMA) made announcements to address sustainability issues in the financial sector.
The European Banking Authority (EBA) published regulatory standards on identification of a group of connected clients (GCC) as well as updated the lists of identified financial conglomerates.
The General Board of the European Systemic Risk Board (ESRB), at its December meeting, issued an updated risk assessment via the quarterly risk dashboard and held discussions on key policy priorities to address the systemic risks in the European Union.