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Hot Dog Days

Aug 08, 2017
Financial Institutions

We have come to the end of the dog days, that period of time often associated with the hot, sultry, and lazy days of summer. Cue the desert scenes, the sun umbrellas, and the lemonade stands. Do the dog days really have anything to do with dogs? Maybe the dog days are related to hot dogs? 

I was curious enough to check it out. The dog days once coincided with the rising of Sirius, the most prominent star in the constellation Canis Major. If your Latin is proficient, you know Canis Major means "greater dog." Sirius is from the Greek Seirios, meaning glowing or scorching, referring to the brightness of the star. In Cairo, the rising of Sirius occurs on July 19, just before the summer solstice. The ancient Greeks and Romans saw the rising of Sirius as the beginning of the hot season, which brought on drought. For most of us, however, any such connections to astronomy have been long lost, and we have simply adopted the term. 

I find this to be a particularly common theme in banking. Regulatory and accounting pronouncements tend to have names for which we create acronyms. Once the acronym has been in play for a while, we may remember what the letters stand for but forget the history and meaning behind the term or vice versa. How many of you can rattle off the actual regulation referred to as FIRREA (the Financial Institutions Reform, Recovery, and Enforcement Act of 1989) or why it was enacted? Here's one of the newer acronyms looming:  CECL, pronounced the same as the name Cecil (which, incidentally, wouldn't be a bad name for a dog).

CECL is FASB's new accounting model for calculating your ALLL. Translation:  The Current Expected Credit Loss model is the Financial Accounting Standards Board's new accounting model for calculating your Allowance for Loan and Lease Losses! CECL will replace the current "incurred loss" accounting model with an "expected loss" model in the future. Banking regulators consider this "the biggest change ever to bank accounting." Instead of recognizing a loan or lease loss when incurred, the loss recognition will be booked at inception. Once you let that concept sink in, you will not want to forget the name Current Expected Credit Loss, and you will not want to let sleeping dogs lie! "Siriusly!" Contact your relationship executive for more information about this change on your horizon. 

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