Fed releases second tool to help implement CECL accounting standard

The Federal Reserve announced in June it released a second tool to help community banks implement the Current Expected Credit Losses, or CECL, accounting standard.

Known as the Expected Losses Estimator (ELE), the spreadsheet-based tool utilizes a financial institution’s loan-level data and management assumptions to aid community banks in calculating their CECL allowances.

“The Fed’s unique approach in providing CECL compliance tools for small banks, through SCALE and today’s introduction of the ELE tool for more complex small banks, continues our work to tailor supervisory approaches to fit the size, risk and business model of financial institutions. I am confident these tools will assist our smaller banks enabling them to prioritize serving the financial needs of their communities and customers,” said Governor Miki Bowman.

The launch of the ELE tool builds on the Federal Reserve’s previous release of the Scaled CECL Allowance for Losses Estimator, or SCALE, tool that also helps community banks implement the CECL accounting standard. Together, the ELE and SCALE tools provide two simplified approaches to CECL calculations for smaller community banks.