CECL accounting standard still under fire as banks report day-one impact

[Updated on January 28 with comments from CreditSights analysts.]

Strong performances by JPMorgan and Morgan Stanley, and disappointments at Goldman Sachs, dominated commentary around the 2019 US bank earnings calls in January.

However, lurking in the background was the less eye-catching but critically important CECL, the current expected credit losses accounting standard that banks are adopting this year and which has been an important driver of increases in their allowances for loan losses for 2020.

The new standard dates back to a Financial Accounting Standards Board (FASB) ruling in 2016 and requires banks to account for expected credit losses for the lifetime of a loan upfront.