Challenges and solutions for wholesale portfolios

Jimmy Yang and Kenneth Chen

Most large financial institutions began implementing CECL from January 1, 2020.11 In November 2019, the Financial Accounting Standards Board (FASB) published new guidance that allows financial institutions meeting certain criteria to delay CECL implementation until 2023 (see https://www.fasb.org/jsp/FASB/Document_C/DocumentPage?cid=1176173775344&acceptedDisclaimer=true). Since then, there are a wide range of industry practices, challenges and lessons that could help industry participants with ongoing enhancements, as well as with the 2023 filers for any initial CECL implementations. General industry observations cover rule interpretations, methodology development, and implementations, validation, production processes, internal communications, ongoing monitoring, and downturn readiness. At the time of writing, the COVID-19 pandemic posed a significant risk to the overall economy and to financial institutions’ wholesale portfolios. Implementing CECL in such an environment, including the unprecedented stimulus packages offered by various governments, has drastically increased the challenges to financial institutions’ CECL systems. Industry participants have been “taking notes”, and

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