CECL (Current Expected Credit Loss)

CECL (Current Expected Credit Loss) is an accounting standard that requires financial institutions to estimate and set aside money for possible future loan losses upfront, based on expected future defaults rather than past events. This proactive approach ensures banks and lenders are better prepared for potential credit risks, providing a more accurate picture of their financial health. Instead of waiting for losses to occur, CECL encourages recognizing anticipated credit risks early, promoting transparency and financial stability in the industry.