Assessment of
"Currently" Identifiable Risks
Primary Objective of CECL:
To have a sufficiently precise level of reserves so as not to need replacement provisions at time of loss.
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The CECL Literature
neither
Prescribes nor Endorses
any particular
Reserve Calculation Methodologies
Rather:
Methodologies are Left to Each
Individual Bank to Adopt or to Develop
Based upon clearly defined
CECL
Principles & Guidelines
neither
Prescribes nor Endorses
any particular
Reserve Calculation Methodologies
Rather:
Methodologies are Left to Each
Individual Bank to Adopt or to Develop
Based upon clearly defined
CECL
Principles & Guidelines
"Contemporary Assessment"
"Current" Loss Exposure
"Forward Looking"
Comprehensive Exposure
Current Exposure Levels extended to
Total Period of Potential Credit Exposure in Years
(Remaining Contractual Life)
Current Exposure Levels extended to
Total Period of Potential Credit Exposure in Years
(Remaining Contractual Life)
Reserve Calculation Methodology
Initially & Continuously on every Loan / Risk Asset
Must be computed “on the fly”
Must be computed “on the fly”
~ Therefore, accurate download data is essential ~
