Current Expected Credit Loss (CECL)

Oakleaf is at the forefront of identifying best practices and pathways to help its financial services clients prepare to implement CECL (current expected credit loss).  The new Financial Accounting Standards Board (FASB) Accounting Standards Update on Financial Instruments – Credit Losses (Topic 326) requires revolutionary changes to the way banks determine appropriate levels of balance sheet reserves for credit losses.  The calculation of the expected credit loss must now be computed over the life of the loan, as opposed to the previous model, in which banks recognized losses when they reached a probable threshold of loss, which may have under-represented impairments as well as potential future losses.

Incurred Loss Model CECL
  • Credit loss estimates reflect historical and current information.
  • Many incurred loss models are calibrated to historical annualized charge-off rates.
  • Credit loss estimates reflect historical, current and future-looking information.
  • "Life of Loan" loss estimate upon initial recognition of asset.
  • Uses reasonable and supportable forecasts.
  • Refinement of impairment model for AFS debt securities.


As of December 15, 2019, public business entities that are US SEC filers are subject to this new accounting standard, which will change how financial institutions account for expected credit losses and estimate losses in their allowance for loan and lease losses (ALLL).  Any institution that issues credit, including banks, savings institutions, credit unions and holding companies that file under GAAP accounting standards are affected, as are entities holding financial assets and net investment in leases that are not accounted for at fair value through net income are affected.

Effective dates are as follows:

Institution Effective Dates

Public, SEC Filers

December 15, 2019

All other Public Institutions

December 15, 2020

Private Institutions

December 15, 2021


Oakleaf services in this area include:

  • End-to-end Process Design and Requirements Analysis
  • Business Requirements and Data Requirements Analysis
  • Design, Implementation and Testing of Results Aggregation
  • Regulatory Data Mart (requirements, database design, data dictionary)
  • Asset Taxonomy Analysis (to support mapping and deduplication)
  • Operational Support for Stress Test Execution
  • Current and Future State Documentation (process flows, procedures)
  • Regulatory Reporting Tool Requirements
  • Testing Documentation
  • Project Reporting