CECL
CECL problems, Libor and capital relief
The week on Risk.net, June 6-12, 2020
Banks push for capital changes as CECL provisions soar
Spike in set-asides exposes fault lines between new accounting standards and Basel rules
US regional banks put $18bn aside for credit losses in Q1
Huntington, Citizens, Truist saw provisions increase over 400% on Q4 2019
Covid loan losses exceed 2019 CCAR projections
CECL accounting likely responsible for discrepancy
Systemic US banks put aside $25bn for credit losses in Q1
JP Morgan took a $8.3 billion provision, the most of the eight G-Sibs
CECL delay grants mid-sized US banks a capital windfall
Synchrony, Huntingdon and Citizens among those to reap most CET1 relief
Current expected credit loss procyclicality: it depends on the model
This work looks at a wide range of models to test the degree to which CECL is procyclical for different types of model.
As Covid snaps credit models, lenders turn to stress-testing
Banks enlist scenario analysis to bolster creaking default models
CECL working as intended amid Covid-19 crisis, says FASB
Suspending new standard would be a decision for regulators, not accountants, say observers
CECL muddies stress tests for US banks
Accounting forecasts differ from Fed’s CCAR scenarios; banks seek middle way to avoid upfront capital hit
CECL models may leave banks ill-prepared for next downturn
Mortgage backtest study shows some loan-loss models miss the mark
At US banks, CECL effects differ wildly
Truist bank sees reserves leap +150%; average increase is +50%
CECL drains $2.9bn from Capital One’s CET1
Core capital ratio to fall 16 basis points following switch to new accounting standard
US Bancorp trimmed toxic assets in Q4
Non-performing asset rate falls to 0.28%
JP Morgan takes $2.7bn capital hit from CECL
Credit card portfolios see allowances for loan losses spike the most
Risk weight tweak could fix IFRS 9 capital clash – research
Practitioner suggests way to cancel out double-counting of Basel credit loss provisions
CECL prompts loan sales, hunt for insurance
Risk USA: ‘CECL hogs’ could deplete capital ratios and be a drag on earnings
Banks join forces on model development utility
Crisil is working with HSBC and three other banks on platform to share model-building tools
CECL could force Capital One’s loss reserves up 40%
Loss allowances could jump to almost $10 billion on January 1, 2020
A tech-driven transformation
A panel of experts explores how greater collaboration between risk and finance teams can garner significant benefits and add value, how technological innovation is making the regulatory landscape more complicated to navigate and produce transformative…
Citi raises CECL reserves estimate
A 30% jump in reserves would translate to a roughly 30bp capital hit
FASB bins regional bank CECL proposal
Plan would have allowed smaller lenders to reduce capital impact of expected losses