Applying Qualitative Factor Overlays on CECL Models: Key Considerations

With the initial deadline for adherence to the Current Expected Credit Loss (CECL) accounting standard approaching, regulators and industry representatives gathered in New York recently for the CECL 2019 conference to discuss the top-of-mind considerations for CECL and understand what public, SEC-filing institutions should be doing to prepare to go live with the standard on January 1, 2020. One topic that stimulated substantial discussion was the qualitative factors play in estimating the appropriate reserves under the new CECL methodology.

This article provides qualitative and environmental factors an organization should consider for a successful CECL preparation.