DBRS Morningstar Publishes Commentary on “CECL Implementation Unlikely to Impact Bank Ratings”

DBRS, Inc. (DBRS Morningstar) published a commentary highlighting the CECL implementation, effective for all DBRS Morningstar-rated U.S. banks on January 1, 2020. Replacing the incurred loss standard, CECL is a forward-looking impairment approach that requires banks to book expected lifetime losses on the first day of origination. This standard is a change from the current system, which records losses when they become probable that they will occur.

Key highlights include:

--CECL became effective on January 1, 2020 for large U.S. banks.
-- The implementation will likely result in an increase in reserve levels for the majority of banks.
-- DBRS Morningstar expects the implementation to be credit neutral.

“In DBRS Morningstar’s view, given current capital levels, U.S. banks are well positioned to implement the new accounting standard and no rating actions are expected,” said John Mackerey, Senior Vice President.

This commentary is available at www.dbrs.com.

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