KBRA Releases Research – Coronavirus (COVID-19): CECL and Q1 2020 Provisions

Kroll Bond Rating Agency (KBRA) releases a survey of Q1 2020 provisions for credit loss by domestic commercial banks, comparing institutions that adopted the new Current Expected Credit Loss (CECL) accounting rule versus peers who continue to report under the old accounting incurred loss method (ILM).

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Business Wire, Inc.Business Wire, Inc.
Retrieved on: 
Tuesday, May 19, 2020
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Finance, Banking, Accounting, Professional services, Insurance, Credit rating agencies, Nationally recognized statistical rating organization, Kroll Bond Rating Agency, Provision, Finance, Money, Economy, Current Expected Credit Losses
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United States, NEW YORK
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KBRA AND KBRA EUROPE
Summary
Key Points: 
  • Kroll Bond Rating Agency (KBRA) releases a survey of Q1 2020 provisions for credit loss by domestic commercial banks, comparing institutions that adopted the new Current Expected Credit Loss (CECL) accounting rule versus peers who continue to report under the old accounting incurred loss method (ILM).
  • Banks that adopted CECL saw their average Q1 2020 provision expense increase more than 64% QoQ than for banks that follow ILM accounting.
  • This report looks at reasons behind these differences as well as possible reasons to account for the wide variance.
  • KBRA is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO.


Kroll Bond Rating Agency (KBRA) releases a survey of Q1 2020 provisions for credit loss by domestic commercial banks, comparing institutions that adopted the new Current Expected Credit Loss (CECL) accounting rule versus peers who continue to report under the old accounting incurred loss method (ILM).

Banks that adopted CECL saw their average Q1 2020 provision expense increase more than 64% QoQ than for banks that follow ILM accounting. This report looks at reasons behind these differences as well as possible reasons to account for the wide variance. The analysis also compares regional and community banks by their provision expense versus past credit cycles and discusses why the sudden jump in macroeconomic factors, such as the unemployment rate, complicates the operation of CECL estimation models.

Click here to view the report.

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About KBRA and KBRA Europe

KBRA is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider and is a certified Credit Rating Agency (CRA) with the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is registered with ESMA as a CRA. Kroll Bond Rating Agency Europe Limited is located at 6-8 College Green, Dublin 2, Ireland.

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