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CECL Historical Loss Misconceptions

Examples with real bank data

A misconception may have created a false sense of CECL readiness for some institutions. The notion that an institution will be CECL-compliant by utilizing a historical loss rate methodology extended from a current model is inconsistent with the requirements of a forward-looking model and will not yield a calculation that faithfully estimates an actual, life-of-loan loss at a portfolio or asset level. By nature the “expected loss,” or forward-looking element of the new standard, changes the application of the current “incurred loss” annualized historical loss rate methodology.

In this whitepaper:

  • Historical loss methodology misconceptions
  • Measuring the impact with real bank data
  • Next steps for your institution

Download Whitepaper