CECL OVERVIEW AND REGULATORY CAPITAL ISSUES
FEATURED TOPIC AT MAY DINNER
Executive Compensation Presented at May Mini-Session
ARTICLE AND PHOTOGRAPHY BY DAVID LAUWE - META4 COMMUNICATIONS
CECL Overview and Regulatory Capital Issues was the featured topic at the Chapter’s recent May Dinner Meeting. Robert De Tullio, Accounting Policy Advisor from the Office of the Comptroller of the Currency, shared his expert knowledge on this important topic with the Membership. The afternoon mini-session featured a timely executive compensation presentation by J.R. Llewellyn, Senior Vice President, Compensation Advisors, a member of the Meyer-Chatfield Group. The meeting was held on Wednesday, May 9, 2018 at the Stony Hill Inn in Hackensack, NJ. Members networked during the cocktail hour following the mini-session before enjoying a full course dinner featuring sirloin steak or fresh salmon.
At the start of the dinner program, Chapter President Steve Feehan presented the 2018 Chapter Scholarship Awards to a pair of very deserving candidates. Jesse Del Buono is a student at Ramapo College and is working towards a major in Finance and a minor in Mathematics. Jesse grew up in Livingston with his parents and two older brothers. Alejandrina De La Cruz is a New Jersey Educational Opportunity Fund scholar at Ramapo College as a first-generation student and is working towards a major in accounting. Alejandrina is the Student Government Association Treasurer, a resident assistant (RA), a member of the ASB Dean’s student advisory council, and a member of the Chi Alpha Epsilon Honor Society.
Robert De Tullio presented an excellent overview of the impending CECL or Current Expected Credit Loss regulation that will become effective for fiscal periods beginning after December 15, 2019, which for most institutions will be the first quarter of 2020. Robert discussed how the new CECL regulation compares to current generally accepted accounting principles concerning when losses are recognized, how much loss is recognized and the information that should be used to determine the expected loss. He emphasized that the components of the loss calculation are much more comprehensive than current regulations. In addition to evaluating current conditions, institutions should consider historical loss information while using reasonable and supportable forecasts among other factors to arrive at an expected loss.
Robert noted that the CECL calculation introduces the “Life of Loan” concept which considers prepayments in addition to the contractual loan maturity. He emphasized how the allowance under CECL will require greater judgement and oversight as well as increased internal controls to ensure that the allowance is accurate. Robert demonstrated the methods institutions should consider when calculating the loss provision under CECL. Robert briefly discussed the proposed regulatory capital changes in conjunction with the adoption of CECL.
Robert provided several useful links to source material regarding CECL implementation that financial managers should find useful:
Dedicated CECL mailbox: CECL@occ.treas.gov
J.R. Llewellyn discussed the latest in executive compensation along with findings from the 2017 Bank Director Compensation Survey during the afternoon mini-session. J.R. discussed the top challenges that banks face when determining executive compensation. He noted how banks are not just competing with other banks, but with other industries as well. He emphasized the importance of developing a comprehensive compensation plan that allows the bank to attract and retain key executives while remaining competitive. He recommended the methods that institutions should consider to motivate top talent and develop the appropriate sense of value and compensation structure. He further stressed that developing the proper corporate culture effectively drives performance. J.R. effectively contrasted the top 10 attributes valued most by millennials, gen xers and baby boomers regarding compensation. He discussed the three primary types of equity and benefit compensation and provided useful examples of how to develop an effective compensation plan.
Topics and Speakers
CECL Overview and Regulatory Capital Issues
Robert De Tullio
Accounting Policy Advisor
Office of the Comptroller of the Currency
Senior Vice President