As financial institutions analyze the Current Expected Credit Loss standard (CECL) requirements and begin to run various modeling scenarios in order to ascertain the impact to capital when adopted, some institutions could face substantial adjustments. On the heels of preparing for CECL, the Economic Growth, Regulatory Relief, and Consumer Protection Act (Relief Act) was signed into law which is considered as a long overdue partial rollback of the Dodd-Frank Act. The Relief Act dilutes some of the stringent regulations imposed by the Dodd-Frank on the U.S. financial system, and is primarily aimed at making things easier for small- and medium-sized U.S. banks. Many of these financial institutions were seen as being affected by the tougher rules in a disproportionate manner compared to their larger rivals.
CECL is changing the way financial institutions conduct business, so make sure your processes are putting you on the right path toward compliance.
As interest rates continue rising, community financial institutions that take a more strategic and data-driven approach to loan pricing and portfolio management will stand to benefit from the strengthening economy. Loans are one of the most profitable ways to leverage an institution’s funds, so banks and credit unions with an extensive understanding of their loan pricing models will be positioned for maximum portfolio growth and profitability.