Closing thoughts

Laurent Birade, Masha Muzyka, Yashan Wang and Jing Zhang

IT WAS THE BEST OF TIMES, IT WAS THE WORST OF TIMES

It is not an easy task to describe the timing when CECL went live. Under a familiar set of benign economic conditions in January 2020, financial institutions were generally ready to prepare an estimate of losses based on the new accounting standard. Forward-looking forecasts in January had values consistent with the then historical norm, with upside and downside scenarios not a radical departure from the baseline view. However, by the end of the first quarter the economic environment and its prospect could not have been more different and unpredictable due to the COVID-19 outbreak. What transpired during the rest of 2020 was astoundingly unprecedented.

The human toll exacted by one of the worst pandemics in modern history has been staggeringly sad and somber, with more than 100 million people infected and over two million lives lost worldwide at the time of writing. The economic fallout has been abrupt and extreme, starting with a sudden stop of economic activities in many sectors, followed by an uneven reopening and recovery since, resulting in the highest unemployment rate and the steepest drop in GDP since World War II.