The Effect of the Current Expected Credit Loss Approach on Banks' Lending during Stress Periods: Evidence from the COVID-19 Recession

• 成果类型: Article
• 署名作者: Chen, Jing; Dou, Yiwei; Ryan, Stephen G.; Zou, Youli
• 署名单位: Stevens Institute of Technology; New York University; University of Connecticut
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/TAR-2022-0275
• 发表日期: 2025
• 页码: 113-138
• 关键词: LOAN LOSS PROVISIONS

摘要

In the wake of the financial crisis, policymakers expressed the concern that the incurred loss model delays loan loss recognition to economic stress periods and thereby exacerbates banks' lending contraction during these periods. Addressing this concern, the FASB issued Accounting Standards Update 2016-13, which requires large public banks to accrue for loan losses using the current expected credit loss (CECL) approach starting in January 2020. We hypothesize and find that banks that adopted CECL prior to the COVID-19 pandemic increased loan loss provisions and reduced loan growth during the accompanying recession more than other banks. The lending contraction is stronger for adopting banks with low regulatory capital and low loan impairment and is primarily driven by commercial loans. Lastly, we find that counties in which CECL-adopting banks have higher market share experience larger increases in unemployment rates during the recession and slower subsequent recoveries.