CECL

status: draft

Current expected credit loss. An accounting standard requiring entities to recognize lifetime expected credit losses at origination rather than waiting for losses to be incurred. Replaced the previous incurred-loss model.

What to watch

CECL reserves affect originator financials and can create Day 1 loss recognition on new originations. Check how the originator models lifetime losses and whether their CECL methodology is conservative or aggressive. Higher CECL reserves reduce reported equity.