A new U.S. accounting standard is about to make a huge difference in what banks’ financial statements and earnings look like—and for some of them, what their future lending practices could be.
The standard is known as CECL—for current expected credit losses. It’s considered accounting rulemakers’ chief response to the 2008 financial crisis.
Starting in 2020 banks have to venture into new territory, factoring future economic developments into expectations for credit losses, and put aside loan loss reserves for them. That means impacts on earnings, stock prices, and capital. Some critics say it could affect banks’ appetites for anything but the safest loans.
Bloomberg Tax reporter Nicola White spoke with Talking Tax host Amanda Iacone about how the standard works, what challenges banks face, and the latest developments from the Financial Accounting Standards Board.