Home > Second Issue 2020 > CECL Corner: CECL and the CARES Act

CECL Corner: CECL and the CARES Act


The Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law on March 27, 2020, and contained Section 4014 Optional Temporary Relief from Current Expected Credit Losses. This section outlined the option to delay the implementation of current expected credit loss (CECL) accounting standards until the earlier of the date the national emergency related to the COVID-19 outbreak is terminated, or December 31, 2020. On April 3, 2020, Securities and Exchange (SEC) Commission Chief Accountant Sagar Teotia issued a statement indicating that eligible, participating institutions would be considered in compliance with Generally Accepted Accounting Principles.


Impacted institutions are those scheduled to adopt CECL in 2020. Eligible institutions may opt to continue with CECL implementation as planned in 2020 rather than utilize the deferral. Most community banking organizations are not required to adopt CECL until 2023 (see table).

Public Business Entities

Private and All Others

SEC Filers

All Other Public Business Entities

CECL adoption requirement

January 2020 (excludes smaller reporting companies)

January 2023 (includes smaller reporting companies)

January 2023


Under Section 4014, organizations may delay the implementation because of the uncertain nature of the current lending environment and the understanding that forecasting foreseeable losses is particularly challenging at this time. The application of CECL standards is retrospective to the beginning of the organization’s fiscal year.

Agencies Issue Revised Capital Transition of the CECL Methodology for Allowances

On March 27, 2020, the federal banking regulatory agencies announced an interim final rule that delays the estimated impact on regulatory capital stemming from the implementation of CECL for a transition period of up to five years. The interim final rule provides banking organizations that implement CECL before the end of 2020 the option to delay for two years an estimate of CECL's effect on regulatory capital, relative to the incurred loss methodology's effect on regulatory capital, followed by a three-year transition period. Alternatively, banking organizations may use the three-year regulatory capital CECL transition rule issued by the banking agencies in February 2019.

The agencies are providing this relief to allow such banking organizations to better focus on supporting lending to creditworthy households and businesses in light of recent strains on the U.S. economy as a result of COVID-19, while also maintaining the quality of regulatory capital. The recently announced changes to the regulatory capital transition timelines are effective immediately.

For information regarding the interaction between the CARES Act and the interim final rule, see Supervision and Regulation (SR) letter 20-9, “Joint Statement on the Interaction of Regulatory Capital Rule: Revised Transition of the CECL Methodology for Allowances with Section 2014 of the Coronavirus Aid, Relief, and Economic Security Act.”


—Kalyn Neal, Examiner/Supervisory Specialist, Examinations & Inspections, Federal Reserve Bank of Kansas City

Back to top

System Outreach

The Federal Reserve System provides various resources for training, services, and more.

Learn more »

Policy and Guidance

Connect to various Federal Reserve resources, including SR and CA Letters, regulations, request for comment on rulemaking proposals, the latest Federal Reserve System speeches, and more.

Learn more ยป


Community Banking Connections is a quarterly Federal Reserve System publication available electronically or in print.

Learn more »


We want to hear from you! Please share with us any comments, suggestions, or topics that you would like to see on our website or in our publications.

Learn more »