The CECL Handbook: A Practitioners Guide

The CECL model implementation requirement arguably represents one of the most influential changes to accounting standards which financial institutions have ever seen. The new standard may upend many business areas within an organisation, affecting loan origination, commercial policies, and portfolio strategy and management, to name but a few. Financial institutions have to implement the CECL accounting standard by January 1, 2023. The CECL Handbook; A Practitioner’s Guide is the reference book for 2023 adopters and a great training manual for staff within banks that have already adopted. The team of editors – comprising several senior directors from Moody’s Analytics – Masha Muzyka; Laurent Birade; Yashan Wang; and former head of Research, Jing Zhang, have brought together a unique group of experts experienced in preparing and implementing the new CECL model. Set out over three sections this book provides a comprehensive instructional guide, covering key assumptions, requirements and challenges for different asset types as well as different stakeholders in the process such as auditors, management, investment analysts and regulators. The book also considers the downstream processes impacted by the new implementation and guidance. PART I: REQUIREMENTS: describes the CECL requirements and presents an overview of the most impactful challenges encountered during initial implementation both from an auditor’s and a banker’s perspective. PART II: INDUSTRY IMPLEMENTATION PRACTICES: discusses specific industry\-implementation practices. PART III: BUSINESS IMPACTS AND IMPLICATIONS: explores how institutions need to think through the impact on processes such as portfolio management, origination and loan pricing, as well as provides tips for becoming better at data\-driven decision making. The new standard’s impacts are wide and far\-reaching, it is an understatement to say that the forward\-looking CECL standard is a game\-changer and this book provides readers with a roadmap to effective credit risk measurement and management which complies with the new accounting standard.