Our Position

Current Expected Credit Loss Model


  • ICBA opposes any implementation of the current expected credit loss (CECL) model for small community bank loans and investment securities by the banking regulators that contradicts the view of the FASB that smaller community financial institutions should utilize existing processes to project future credit losses when providing for the loan loss provision.
  • ICBA supports legislation that would stop the implementation of CECL pending study of the impact of the new standard on lending trends in underserved communities.
  • Regulators should continue to supply small community banks with clear, practical, and easy-to-implement methodologies for calculating the periodic provision for estimated credit losses. These methodologies should allow for the seamless incorporation of existing processes.
  • For community banks that do introduce modeling into their loan loss provisioning processes, inputs to models should be community or transaction specific and not based on more global economic factors that may be difficult to source, maintain, or apply in a practical manner.
  • Examination processes related to model validation and process management should be published for public comment and incorporated into agency guidance on prudent credit risk management.
  • ICBA recommends caution and due skepticism in the consideration of third-party vendor solutions. External loan loss estimation methodologies and data stores should be considered only when the size and scale of loan operations warrant such an alternative.
  • ICBA supports regulatory capital relief for community banks as they adopt CECL in the form of a phased implementation of the cumulative effect adjustment on the opening balance of retained earnings.


ICBA opposes any impairment model for portfolio loans and investment securities that would increase costs and regulatory burdens for small community banks. The initial version of FASB’s CECL model would have required small community banks to use complex cash flow modeling to generate expected losses over the life of the loan or security. Such modeling would have required community banks to dedicate valuable resources to model selection, testing, production, and maintenance in addition to extensive data sourcing, warehousing, and administration.

ICBA supports the agency rule that allows a three-year phased implementation of CECL as it impacts common equity tier 1 capital on the date that a bank adopts CECL. ICBA had requested that the phase-in period be extended to five years to allow for unforeseen economic conditions that could introduce stress into community bank capital balances. For this reason, ICBA also supports recent amendments to the standard to delay implementation for smaller community banks as well as legislative proposals to delay the standard’s implementation until its impact on underserved communities can be studied.

Staff Contact

James Kendrick

First VP, Accounting and Capital Policy


[email protected]