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
Scott is a Director in the Regulatory and Accounting Solutions team responsible for providing accounting expertise across solutions, products, and services offered by Moody’s Analytics in the US. He has over 15 years of experience leading auditing, consulting and accounting policy initiatives for financial institutions.
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