Financial institutions can’t afford to tune out CECL

While my son was home from college this summer, we have had several discussions about politics and the world around us. Our discussions, though, were often cut short because I just didn’t want to talk about it.

Over the past several years, I have found myself “tuning out” of politics for a number of reasons. News reports tend to feel very slanted, and we are bombarded with negative political ads (I have already seen some this year and we are over a year away from 2022’s midterm elections). It seems that everything we hear is either negative or filled with controversy. Politics. The pandemic. Wildfires. Hurricanes. Earthquakes.

I think some financial institutions might be also tuning out when it comes to CECL.

Regulators, auditors, and solution providers are giving the industry different views about what institutions need to do. We have been hearing nonstop news about CECL for years even though it won’t be effective until 2023 for most institutions. Some institutions may be asking, “Will CECL change our operations that much, or is this just a big scare tactic?”

Although it may be difficult to focus on CECL, it will require changes for every institution, some more than others depending on the methodology used and certain other factors.

Even though the adoption date may seem like a long way away yet, better planning now will make the implementation process easier in the long run, resulting in a better outcome. In fact, one of the messages we have heard from those that have already adopted CECL is that the year of testing prior to the adoption date was invaluable. So if an institution was to begin testing its CECL methodology in the first quarter of 2022 (one year before the effective date), a lot of planning needs to be wrapped up by the end of 2021.

If you find you are tuning out CECL, this may be a great time to reach out to your Wipfli relationship executive to schedule a CECL Readiness Snapshot meeting where we can help you focus on what’s most important for you and your institution to move forward.

You can also check out these additional resources:

CECL’s impact on financial institutions

CECL: What should my financial institution being doing now?

Wipfli’s CECL calculator and consulting solution