Community banks have concerns over implementing the CECL accounting standard due to its complexity and high costs. A survey found that 50% of banks are in the early stages of implementation and only 3% are ready, while 40% plan to outsource compliance due to lack of internal resources. Regulators are providing training to examiners and working to ensure consistent expectations, but banks report unclear guidance. Actions for banks include understanding CECL, setting an implementation plan and date, exploring data and vendor options, and ensuring board oversight of any vendor relationships.

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IMPLEMENTING THE CECL
STANDARD: 5 ACTIONS TO TAKE
NOW
Excerpt from The RMA Journal article, “RMA’s
Community Bank Council Meets with
Regulatory Agencies to Discuss Top Issues”

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CONCERNS
Many community banks
have concerns over the
implementation of the CECL
standard and the expense
associated with it.

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50%
Bankers in the early
stages
Results from a recent RMA
survey of community banks
revealed that 50% of the
respondents indicated they
were still in the early stages of
implementation, and only 3%
indicated they were ready for
implementation.
STATE OF READINESS

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40%
Bankers will
outsource to meet
CECL requirements
Approximately 40% of
respondents revealed they
would be outsourcing to meet
the requirements of CECL,
owing to its complexity and
banks’ lack of internal
resources.
STATE OF READINESS (CONT.)

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CONCERNS (CONT.)
Bankers have remarked on a
lack of clarity or definitive
guidance regarding CECL
implementation and regulators’
expectations.

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CONCERNS (CONT.)
Community banks
suggest that the CECL
model seems too complex
and implementation will
be too costly.

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INTERAGENCY WORK IN PROGRESS
Regulators have focused more on CECL training, and there is
some interagency work being done to get both the agencies and
the examiners on the same page.

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INTERAGENCY WORK IN PROGRESS (CONT.)
This combined effort has
included the following:

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INTERAGENCY WORK IN PROGRESS (FED)
• The Federal Reserve has
provided its examiners with
foundational training, and
was expected to take a
deeper dive on CECL topics
by year-end.
• Examiners have been
directed to keep bank size
and complexity in mind.

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INTERAGENCY WORK IN PROGRESS (OCC)
• The OCC started initial training
in January, during which
individuals from each field
office underwent a one-and-a-
half-day training session.
• They will go back for additional
training in 2019 and then teach
those in their field offices.
• The OCC also has webinars to
address immediate concerns.

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INTERAGENCY WORK IN PROGRESS (OCC CONT.)
There will be some
periodic monitoring of
institutions, as well as
quarterly calls in which
examiners will ask the
banks where they are on
CECL.

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INTERAGENCY WORK IN PROGRESS (FDIC)
• The FDIC is conducting
examinations based on today’s
current loss methodology.
• Some training has taken place
on the basics of CECL.
• Webinars for examiners and
bankers have been held, and a
Q&A session was planned for
the summer.

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INTERAGENCY WORK IN PROGRESS (FDIC CONT.)
The FDIC is also working
on a rollout of formal
questions for examiners to
ask banks in regard to how
they are progressing and
where they may be falling
short.

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CECL ACTIONS
1
Banks should have a good
understanding of CECL, and their
processes should be under way.

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CECL ACTIONS (CONT.)
2
Banks should have set a date for
CECL implementation and have an
overall plan.

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CECL ACTIONS (CONT.)
3
Regulators would like banks to be
exploring third-party risk
management, as well as data and
methods.

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CECL ACTIONS (CONT.)
4
Boards and management must
make a decision on purchasing a
vendor tool.
This is not an issue that is being
driven by examiners.

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CECL ACTIONS (CONT.)
5
Third-party risk management should
be considered when using a vendor
for CECL.

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OTHER REGULATORY HOT BUTTONS
Cybersecurity. Interest rate risk.
Credit quality,
credit
concentrations,
and credit risk.
Liquidity risk.
Core deposits.*
Federal Home
Loan Bank
borrowing and
brokered
deposits.**
IT security. Vendor analysis.
Governance.
Changes to
Libor.
Small-ticket
lending.
*Don’t be concerned by what the FDIC calls a deposit. Look at the bank’s supporting
documents.
**Growth in these areas is a predictor of possible failure.

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LEARN MORE
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