Countdown to CECL: A Timeline for Community Banks By Kate Stoneburner Content Marketing Manager Abrigo Preparing for 2023 Community banks have a 2023 deadline for CECL implementation, leaving limited time to refine their processes. This timeline will help plan the transition. “The time is now” for CECL implementation Large SEC filers have officially adopted the current expected credit loss standard, or CECL, for recognizing credit losses, and other financial institutions are eager to learn from their CECL implementation efforts. While community banks have until 2023 until they must comply with CECL, many institutions were caught up in “analysis paralysis” in their transition, delaying their preparations. Add a global pandemic to the mix, and CECL implementation has been on the back burner for many financial institutions. Experts and 2020 adopters have repeatedly stressed the importance of preparing early. “If you’ve kind of been dragging your feet on this, now is the time,” said Brandon Quinones, Director of Client Education at Abrigo. “The bottom line is, there are no benefits to starting early, because it is no longer early. The time is now to ensure you are ready for Jan. 1, 2023.” Preparing for CECL implementation During Abrigo’s CECL Kickstart webinar, Garver Moore, Managing Director of Abrigo Advisory Services, discussed strategies for financial institutions’ CECL implementation in 2023, including: • How to address the most common CECL implementation problems, such as lack of historical loss experience or unreliable historical data • How to use CECL models that are less reliant on historical, loan-level loss experience • How to implement a straightforward CECL qualitative framework • How to credibly identify peer institutions for the use of external information Community banks just starting their transition to CECL should consider possible partnerships and begin assessing data gaps and accuracy. Leveraging a third-party vendor to assist with CECL can be highly beneficial in the CECL transition, but finding the right vendor is paramount. “You want to avoid ‘black box’ solutions,” explained Quinones. “CECL is all about the data that you have available and the way that you If you’re eager to get planning, but struggling to set goals for CECL implementation, review FASB’s CECL Prep Kit and consider this timeline: www.coloradobankers.org 14
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