KBRA Releases the Bank Treasury Newsletter Chart Deck

NEW YORK--()--Kroll Bond Rating Agency (KBRA) releases this month’s edition of the Bank Treasury Newsletter Chart Deck, which focuses on the new accounting rule, Current Expected Credit Losses (CECL), scheduled to come into effect at the start of the new year. Further, the chart deck discusses how CECL could have hypothetically impacted bank balance sheets had it been in effect before the last financial crisis.

The main takeaway is that the banking industry over-reserved for credit losses under existing generally accepted accounting principles (GAAP), and that switching to CECL will lead to the sector holding higher reserves compared to existing levels—which seems like overkill. FDIC data suggests that community banks began to build up reserves in anticipation of a downtown as early as 2005, and that over 35 years, the banking industry’s net charge-off rate averaged 0.8%, compared to an average nonperforming loan rate of 2.2%.

To view the chart deck, click here.

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About KBRA and KBRA Europe

KBRA is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider and is a certified Credit Rating Agency (CRA) by the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is registered with ESMA as a CRA.

Contacts

Analytical:
Ethan M. Heisler, CFA, Senior Director
(516) 359-0975
eheisler@kbra.com

Business Development:
Dave DeMilt, Managing Director
(646) 731-3335
ddemilt@kbra.com

Contacts

Analytical:
Ethan M. Heisler, CFA, Senior Director
(516) 359-0975
eheisler@kbra.com

Business Development:
Dave DeMilt, Managing Director
(646) 731-3335
ddemilt@kbra.com