As financial institutions prepare to comply with the Financial Accounting Standards Board (FASB) Current Expected Credit Loss (CECL) model, questions abound. This amendment to US GAAP shifts Allowance for Loan and Lease Loss (ALLL) practices from an incurred loss to an expected loss basis — setting off a cascade of implications not only for portfolio profitability and return on equity (ROE), but for product strategies, pricing, collections practices and how companies retain and nurture valuable customer relationships. Here Lynda Woodward and David Binder, Senior Directors at FICO and experts on compliance, analytics and credit decision strategies, answer the questions we’re hearing the most.
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