Benjamin Franklin once said, “Never leave that till tomorrow which you can do today.” All too often I find that my philosophy on life is more along the lines of, “Why do today that which can wait for tomorrow?”
For me as a public accountant, the summertime generally offers a refreshing break from the stress and busyness of tax season. While the slowdown is welcome, I often find it more challenging to be motivated to get serious about projects because there are fewer imminent deadlines. It’s easy to convince myself that tomorrow is the day I will buckle down and start working on all the long-term projects on my “to do” list. But unfortunately, all too often, tomorrow has surprises of its own. At some point, today’s unexpected opportunities are put in jeopardy because yesterday’s projects remain incomplete.
Similarly, I believe many financial institutions are currently struggling to find the motivation to get serious about the new Current Expected Credit Losses (CECL) standard. For nonpublic companies, the standard doesn’t become effective until 2021, so it seems easy to justify holding off another month before getting started. My fear is that for some institutions, another month will quickly turn into another year.
While I appreciate the tremendous time constraints most bankers face, I believe there is substantial benefit to beginning the CECL process today. Building an allowance for loan losses calculation that is consistent with CECL is a multistep process. The sooner you start, the easier it will be to gather all the data necessary to estimate losses under a life-of-loan evaluation—and to find solutions for any data gaps that are identified.
If you’re looking for guidance in getting started on CECL, Wipfli would love to help you out! The following link is for a recent article we published on our website, detailing a potential CECL methodology and also containing links to additional helpful CECL information: https://www.wipfli.com/insights/articles/fi-cecl-methodologies-series-migration-analysis.