Mazars evaluates US Current Expected Credit Losses (CECL) models through the covid-19 crisis
CECL models review through the covid-19 crisis
Mazars conducted a review of 12 banks that implemented the CECL standard. The analysis is based on interim financial statements as of 30 June 2020, focusing on the following areas:
Quantitative assessment:
- Opening balance impact of CECL adoption
- Trends of ACL (Allowance for Credit Loss) as a percentage of gross loans
- Impact on operating profit due to CECL implementation
- Accumulation of credit reserve build due to volatility and foreseeable instability
- Evaluation of non-performing loans due to delinquencies
Qualitative assessment:
- Governance and oversight
- CECL implementation methodology
- Data quality including macroeconomic variables used
- Reasonable & supportable forecast period
- Reversion method
- Other accounting treatment interpretations
- Regulatory considerations
Top findings: