The Current Expected Credit Loss (CECL) model is the new accounting model issued by the Federal Accounting Standards Board (FASB) for the recognition and measurement of credit losses for loans and debt securities.
Amounts that banks do not expect to collect will be recorded in an allowance for credit losses on Held-To-Maturity (HTM) and Available-for-Sale (AFS) debt securities.
TPG will present and discuss our system's approach to debt securities accounting under CECL.
The CECL model applies to the following types of securities measured at amortized cost: corporate bonds, mortgage backed securities, municipal bonds and other fixed income instruments.
FASB concluded that an AFS security should be assessed for impairment differently than an amortized cost asset being held to collect cash flows. Accordingly, the new model will apply to AFS debt securities while HTM debt securities will be assessed for impairment using the CECL model.
AFS - reserves assessed on an individual security (position) basis. When principal loss is realized through payment shortfall:
HTM - reserves assessed on a pooled basis (grouped financial assets with similar risk characteristics).