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What is CECL?

CECL (Current Expected Credit Losses) represents an accounting standard that will replace the current Allowance for Loan and Lease Losses (ALLL) standard.  It is a new accounting model in which lenders evaluate their historic and current losses at different levels of loan types. This enables banks and credit unions to predict future losses and to calculate what to set aside today, by loan type, to cover future losses.  CECL helps financial institutions to estimate future credit losses and decide how much to set aside based on what was historically lost based on various account types.  Unlike ALLL, CECL obligates lenders to estimate at origination for expected credit losses over the life of each loan.