Claim: A criticism of Current Expected Credit Losses is that they force banks to immediately recognize future losses but does not allow them to immediately recognize the higher expected future interest earnings banks receive as compensation for risk, which could result in a decrease in availability of lending to non-prime borrowers, stunting economic recovery following a downturn.
Evidence: Current Expected Credit Losses (CECL) is a credit loss accounting standard (model) that was issued by the Financial Accounting Standards Board (FASB) on June 16, 2016. The Bank Policy Institute points out that CECL forces banks to recognize expected future losses immediately, but does not allow them to recognize immediately the higher expected future interest earnings banks receive as compensation for risk. This could result in a decrease in availability of lending to non-prime borrowers, stunting economic recovery following a downturn.