To Help Banks, Fed Delays Implementation of “Biggest Bank Accounting Change in Decades”

from Zero Hedge

At the end of January, the American Banker website, a proxy voice for the US banking industry, published a report explaining why in the author’s view, the so-called CECL accounting standard (or Current Expected Credit Losses) is a threat to the financial system, and for good reason: it forces transparency into traditionally opaque bank balance sheets.

In a nutshell, the CECL, which has been dubbed “the biggest bank accounting change in decade“, would force banks to recognize expected losses on loans from the day the loan is issued, in effect forcing banks to shore up capital and to reduce the likelihood banks would need a bailout (see Boeing after instead of investing $50BN in a rainy-day fund the company instead repurchased its own shares). Critics of this proposed accounting rule – mostly banks and their shareholders – argue that such draconian demands would make them reluctant to lend to all but the strongest borrowers, and would also cripple shareholders returns (naturally investors would much rather see the bank’s cash returned to them instead of held in some Plan B fund for when times get tough).

Continue Reading at…