[Download] Tải An analysis of the impact of modeling assumptions in the current expected credit loss (CECL) framework on the provisioning for credit loss – Tải về File Word, PDF

An analysis of the impact of modeling assumptions in the current expected credit loss (CECL) framework on the provisioning for credit loss

An analysis of the impact of modeling assumptions in the current expected credit loss (CECL) framework on the provisioning for credit loss
Nội dung Text: An analysis of the impact of modeling assumptions in the current expected credit loss (CECL) framework on the provisioning for credit loss

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The CECL revised accounting standard for credit loss provisioning is intended to represent a forward-looking and proactive methodology that is conditioned on expectations of the economic cycle. In this study we analyze the impact of several modeling assumptions – such as the methodology for projecting expected paths of macroeconomic variables, incorporation of bank-specific variables or the choice of macroeconomic variables – upon characteristics of loan loss provisions, such as the degree of pro-cyclicality. We investigate a modeling framework that we believe to be very close to those being contemplated by institutions, which projects various financial statement line items, for an aggregated “average” bank using FDIC Call Report data. We assess the accuracy of 14 alternative CECL modeling approaches. A key finding is that assuming that we are at the end of an economic expansion, there is evidence that provisions under CECL will generally be no less procyclical compared to the current incurred loss standard. While all the loss prediction specifications perform similarly and well by industry standards in-sample, out of sample all models perform poorly in terms of model fit, and also exhibit extreme underprediction. Among all scenario generation models, we find the regime switching scenario generation model to perform best across most model performance metrics, which is consistent with the industry prevalent approaches of giving some weight to scenarios that are somewhat adverse.

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An analysis of the impact of modeling assumptions in the current expected credit loss (CECL) framework on the provisioning for credit loss

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Nội dung Text: An analysis of the impact of modeling assumptions in the current expected credit loss (CECL) framework on the provisioning for credit loss

Download tài liệu An analysis of the impact of modeling assumptions in the current expected credit loss (CECL) framework on the provisioning for credit loss File Word, PDF về máy