BAI Featured Innovation

ILM vs. CECL: What’s the difference?


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As US financial institutions have filed allowance estimates for Q3 2020, Moody’s Analytics analyzed whether Current Expected Credit Loss (CECL) leads to larger and more volatile levels of allowance than under the Incurred Loss Model (ILM). This paper compares results from CECL adopters that follow the CECL framework, non-adopters that follow the ILM framework, and highlights the differences and potential impacts of adoption.